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.
