Lawmakers slam Fed on crypto as FDIC readies stablecoin rules

US Representative Stephen Lynch challenged Federal Reserve Vice Chair Michelle Bowman on Tuesday, questioning her past statements encouraging banks to “engage fully” with digital assets.

 Lynch also inquired about the Fed’s role in advancing crypto regulatory requirements, while also highlighting confusion regarding the definition of stablecoins. 

Lynch confronts Fed on crypto oversight and stablecoin definitions

During an oversight hearing, Lynch cited Bowman’s comments at the November Santander International Banking Conference, where she expressed support for banks “[engaging] fully” with digital assets. Bowman clarified that her comments applied broadly to digital assets, rather than specifically to cryptocurrencies. 

Lynch pressed her on the distinction between digital assets and stablecoins, and the discussion shifted. Bowman replied that Congress, through the GENIUS Act—a law regulating payment stablecoins—has authorised the Fed to develop a framework for digital asset activities.

“The GENIUS Act requires us to promulgate regulations to allow these types of activities,” Bowman said.

Though the price of several digital assets can be volatile, stablecoins, like those pegged to the US dollar, are generally “stable,” as the name suggests. 

While there have been some occasions where some coins have depegged from their respective currencies, like the crash of Terra’s algorithmic stablecoin some three years ago, the overwhelming majority of stablecoins do not fluctuate past 1% of their peg.

Bowman earlier noted that staff at the Fed should be allowed to hold small “amounts of crypto or other types of digital assets” to grasp better how the technology works.

FDIC prepares national stablecoin framework under GENIUS Act

Travis Hill, acting chair of the Federal Deposit Insurance Corporation, was also present at Tuesday’s hearing. The government agency is one of many responsible for implementing the GENIUS Act, which US President Donald Trump signed into law in July.

According to Hill, the FDIC will propose a stablecoin framework “later this month,” which will include requirements for supervising issuers.

In a few weeks, the legislative Deposit Insurance Corporation (FDIC) will release its first set of proposed guidelines under the GENIUS Act. This represents a significant step forward for the US in its efforts to establish a legislative framework for stablecoins. 

According to Hill, the proposal will explain how stablecoin issuers linked to FDIC-insured banks are regulated and monitored nationwide, moving away from the current system of fragmented, state-by-state monitoring.

That’s only part of a broader effort by regulators to make clearer how traditional banking authorities monitor digital assets such as stablecoins and tokenized deposits. The FDIC’s plan follows President Donald Trump’s signing of a law in July that, for the first time, establishes national requirements for US stablecoins.

The Guiding and Establishing National Innovation for US stablecoins (GENIUS) Act establishes the first government rules for payment stablecoins. It assigns tasks to the FDIC, the Federal Reserve, the Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA) to ensure the law is carried out.

These agencies recently informed the House Financial Services Committee about their plans. This means that the law would eliminate the need for different state systems and establish a single national standard for issuer licensing and supervision.

According to the framework, federal prudential regulators will be responsible for bank-linked issuers; however, states will still be responsible for non-bank businesses unless new rules expand the federal reach.

 The acting chair of the Federal Deposit Insurance Corporation noted that the FDIC will directly oversee the subsidiaries of FDIC-insured banks that want to issue stablecoins. Before a bank’s subsidiary launches a stablecoin, it must submit a formal application. The FDIC will then scrutinize the bank’s business strategies, risk management practices, and compliance procedures.

The first rule this month will establish the application framework for issuers connected to banks. A second proposal, scheduled for release early next year, will establish capital, liquidity, and reserve asset norms for payment stablecoin issuers. These will be the main regulatory protections for this group.

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