ICBA: GENIUS Act rulemaking must not harm lending to local communities

ICBA told the FDIC that its final rule on the GENIUS Act must protect the banking system, prevent regulatory arbitrage, and not accelerate the migration of deposits and lending capacity away from community banks.

Recommendations: In a letter on the FDIC’s proposed rule to implement GENIUS Act requirements on FDIC-supervised institutions that engage in payment stablecoin-related activities, ICBA urged the FDIC to:

• Provide an additional opportunity for public comment before finalizing the rule, given the proposal’s dependence on an unresolved OCC rulemaking.
• Adopt a strict payment stablecoin framework that closes definitional gaps, preserves statutory redemption protections, prevents evasions of the prohibition on payment of yield, and imposes strong capital and risk-management requirements on permitted payment stablecoin issuers.
• Confirm payment stablecoin reserve deposits are not eligible for pass-through deposit insurance and ensure the Deposit Insurance Fund is not used to subsidize payment stablecoin activity.
• Quickly address tokenized deposits through a coordinated interagency process.
• Support a technology-neutral and community-bank-accessible approach to tokenized deposits by accommodating consortium and third-party partner models, addressing settlement and supervisory coordination, and beginning with a deliberate pilot framework rather than broad deployment.

Background: The FDIC in April released the proposed rule to establish a prudential framework for FDIC-supervised payment stablecoins issuers under the GENIUS Act.

ICBA Advocacy:

• ICBA and other groups in April asked the FDIC and other agencies to extend the comment periods for their respective GENIUS Act proposals because the proposals rely on unfinished GENIUS Act regulations from the OCC.
• ICBA in November sent key principles for payment stablecoin supervision in a letter to the Treasury Department regarding implementation of the GENIUS Act.