Stablecoin Holders Won’t Be Protected Like Bank Depositors, Even Though Their Money Backs the System

Individual stablecoin holders have no right to deposit insurance, even though their money funds insured corporate accounts that back the tokens one-to-one.

The FDIC’s proposed rule for permitted payment stablecoin issuers requires full backing of all outstanding stablecoins with highly liquid reserves—U.S. currency and short-term Treasury bills—on a one-to-one basis. Issuers must also prove they can process redemptions within two business days. These reserves are held in corporate deposit accounts at insured banks, which qualify for FDIC insurance up to $250,000 per account.

But the protection stops there. The FDIC explicitly states that insurance does not pass through to individual stablecoin holders. If a stablecoin issuer fails, those holders are unsecured creditors with no direct claim to the insured deposits backing their tokens. The accounts are corporate deposits, and only the issuer—the corporation—has the insured status.

This creates a structural gap: the system relies on insured deposits to maintain confidence, yet the people whose funds generate those deposits receive none of the protection. It mirrors the risk dynamics the IMF recently warned about, likening stablecoins to money market funds that appear stable until confidence collapses.