Federal Rules Block Stablecoin Yields to Protect Bank Deposits

Conventional savings accounts are protected from a deposit exodus to digital assets through a proposed prohibition on passive yields in the 4-5% range. The FDIC proposes this restriction for stablecoins issued by depository institutions through subsidiaries, acting under the Digital Asset Market Clarity Act (CLARITY Act) and the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.

Issuers are prohibited from representing that stablecoins pay yield simply for holding or using a payment stablecoin, including via third-party arrangements. This follows the passage of the GENIUS Act in July 2025, which classified stablecoins issued by permitted entities as payment instruments. This classification removed the legal risk that previously kept banks and payment processors on the sidelines.

Stablecoins issued by these institutions will not have deposit insurance. Tokenized deposits that satisfy the statutory definition of 'deposit' will receive pass-through insurance. To maintain their status, issuers must hold fully backed liquid reserves limited to physical currency or short-term US Treasury bills and publish monthly disclosures of those reserves. They must also maintain capital to manage business risk and an operational backstop based on the previous year's operating expenses.

Issuers must maintain internal protections to comply with the Bank Secrecy Act and possess the technical ability to block, freeze, and reject suspicious transactions. Recipients of cross-border payments receive more money because lower fees and currency conversion spreads reduce the amount of capital that disappears during transfer.