Blockchain Association warns FDIC against favoring big banks in stablecoin rules

Blockchain Association urged the Federal Deposit Insurance Corporation to avoid creating stablecoin rules that disproportionately favor large banks.

It warns that overly restrictive implementation of the $GENIUS Act could undermine competition and push innovation offshore.

In a comment letter submitted on 18 May, the crypto industry group responded to the FDIC’s proposed framework governing how FDIC-supervised institutions could obtain approval to issue payment stablecoins under the $GENIUS Act.

The association argued that Congress intended the law to support a broad mix of stablecoin issuers, including fintech firms and non-bank entities, rather than concentrating the market among only the largest banking institutions.

“A framework that only the largest banks and their subsidiaries can realistically navigate would undermine Congress’s policy objectives by entrenching ‘too-big-to-fail’ institutions and pushing innovation offshore,” the letter stated.

Stablecoin reserve protections become central issue

One of the most significant parts of the letter focused on reserve segregation and bankruptcy protections for stablecoin holders.

The Blockchain Association argued that payment stablecoin reserves should remain legally and operationally separated from the broader balance sheets of parent banking institutions.

According to the group, stablecoin reserves should not function as general funding sources for banks or become entangled with traditional deposit liabilities during insolvency scenarios.

The letter also called for “super-priority” treatment for stablecoin holders. It argues that reserve assets should remain ring-fenced and clearly identifiable even during a bank resolution process.

The debate highlights one of the core policy tensions emerging around stablecoin regulation: whether dollar-backed digital assets should operate as narrowly segregated payment instruments or become more deeply integrated into traditional banking structures.

Industry pushes back against subjective oversight

The association also warned the FDIC against relying on broad or subjective standards when evaluating stablecoin issuer applications.

The group argued that regulators should focus on measurable operational risks, such as:

• cybersecurity,
• custody controls,
• operational resilience,
• sanctions compliance,
• and redemption systems.

At the same time, the letter cautioned against using generalized skepticism toward digital assets or vague reputational concerns as implicit barriers to entry for newer stablecoin issuers.

The filing reflects growing concern within the crypto industry that implementation of the $GENIUS Act could become more restrictive than lawmakers originally intended.

Stablecoin market structure battle intensifies

The comments arrive as banks, fintech firms, stablecoin issuers, and regulators increasingly compete to shape the future structure of the U.S. stablecoin market.

How regulators ultimately define reserve rules, issuer eligibility, and supervisory standards could determine whether the next phase of stablecoin adoption is led primarily by banks or by fintech-native firms.

Final Summary

• The Blockchain Association urged the FDIC not to implement stablecoin rules that disproportionately favor large banks.
• The group also pushed for strict reserve segregation and stronger bankruptcy protections for stablecoin holders under the $GENIUS framework.