Regulators pledge to implement "Genius Act" stablecoin rules and review risks to deposits

Federal regulators told the House Financial Services Committee that they are implementing the Genius Act’s directions on payment stablecoins and related digital-asset oversight and that they expect to issue proposed and final rules ahead of statutory deadlines.

"We are working to provide clarity on digital assets to ensure that the banking system is well placed to support these activities," Michelle Bowman, Vice Chair for Supervision at the Federal Reserve, said during her testimony. Bowman and other witnesses said the agencies have begun or plan rulemakings to define issuer eligibility, reserves, and supervisory expectations for stablecoins.

Acting FDIC Chair Travis Hill said the FDIC rescinded a prior administration's prior-notification requirement for bank digital-asset activity and withdrew interagency joint statements that had discouraged use of public distributed ledgers. NCUA leadership said credit unions are preparing to engage where permitted and that the agency expects to meet statutory deadlines for rulemaking.

Several members warned that interest-bearing stablecoins could cause large deposit outflows from banks; witnesses acknowledged uncertainty. Acting FDIC Chair said staff projections show the DIF reserve ratio would likely grow more slowly under a phased expansion of insured amounts than immediately decline, but he emphasized the projections carry "considerable uncertainty." Regulators said they are analyzing potential migration of deposits and will provide more detailed modeling to the committee in writing.

Regulators committed to interagency coordination, emphasized that the Genius Act prescribes eligible reserve assets (deposits, Treasury securities and other highly liquid instruments), and said they will be attentive to market liquidity and bank safety and soundness as stablecoin rules are drafted.