Stablecoins Not Eligible for Deposit Insurance: FDIC Clarifies No Pass-Through Coverage

The U.S. Federal Deposit Insurance Corporation (FDIC) recently clarified that payment stablecoins are not eligible for "pass-through deposit insurance." This stance aims to avoid public misunderstanding regarding the scope of financial protection, especially during bank failures, preventing users from mistakenly believing that their stablecoins enjoy the same insurance protection as bank deposits.

"Pass-through deposit insurance" refers to the mechanism where, when a customer's funds are deposited into an insured bank through a third-party institution (such as escrow accounts or certain payment applications), the bank's deposit insurance coverage can be "passed through" to the end-user, up to $250,000, provided that the record clearly traces each user's share of the funds. However, stablecoin holders are not bank depositors; they hold digital tokens backed by the issuer's reserve assets. Even if the issuer's reserves include bank deposits or cash equivalents, the user's claim on the funds is against the issuer, not the bank itself. Therefore, from a legal and regulatory perspective, stablecoin balances do not constitute bank deposits and cannot trigger the pass-through insurance mechanism.

FDIC Chairman Travis Hill emphasized, "Payment stablecoins do not meet the conditions for pass-through deposit insurance." The regulatory agency is pushing to enshrine this principle into formal regulations to clarify boundaries and prevent systemic misunderstandings. Meanwhile, the controversy surrounding crypto companies offering yield rewards through affiliates continues. Some banking groups are calling for a complete ban on any form of yield payment, including those from affiliates, arguing that this could trigger deposit outflows and threaten the stability of the traditional financial system. However, industry players, including Coinbase, argue that the relevant legislation only prohibits issuers from directly paying yield and does not explicitly prohibit third-party affiliates from providing incentives. They believe that expanding the ban would not only exceed the original intent of the legislation but also stifle financial innovation and user choice. This regulatory divergence reflects a deep conflict in the underlying logic between traditional finance and the crypto ecosystem: the former emphasizes account ownership and institutional responsibility, while the latter relies on decentralized token economic models. The future direction of the regulatory framework will determine the position and survival space of stablecoins in the mainstream financial system.