Blockchain Association urges FDIC to block bank favoritism

The Blockchain Association urged the Federal Deposit Insurance Corporation on May 18 to avoid drafting GENIUS Act stablecoin rules that would give an outsized advantage to large banks. The group filed a comment letter responding to the FDIC’s proposed framework for how FDIC-supervised institutions could obtain approval to issue payment stablecoins under the GENIUS Act.

The association argued Congress intended the law to allow a broad mix of issuers, including fintech firms and non-bank entities. The filing warned that a framework only the largest banks and their subsidiaries can realistically navigate would entrench too-big-to-fail institutions and push innovation offshore.

A central concern in the letter was how issuers must hold and protect dollar-backed reserves. The association urged that reserve assets for payment stablecoins be legally and operationally separated from a bank’s broader balance sheet so those funds cannot be used as general funding for the bank or become mixed with traditional deposits during a resolution or insolvency.

The group requested ‘super-priority’ treatment for stablecoin holders and called for reserve assets to remain ring-fenced and clearly identifiable throughout any bank resolution process. Regulators were asked to require both legal safeguards and operational practices that make reserve holdings easy to trace and segregate.

The letter cautioned the FDIC against using vague or subjective grounds to deny applications from smaller or non-bank issuers. It asked that approval decisions be based on measurable operational risks such as cybersecurity, custody controls, operational resilience, sanctions compliance and redemption systems rather than broad reputational concerns.

Banks, fintech firms, stablecoin issuers and other market participants have been engaging with regulators as the FDIC develops final guidance. How the agency defines reserve rules, issuer eligibility and supervisory standards will influence whether future stablecoin issuance is dominated by large banks or led by fintech-native and non-bank firms.

The Blockchain Association’s filing joins other stakeholder submissions the FDIC will consider as it finalizes its framework for payment stablecoins under the GENIUS Act.