The FDIC's Stablecoin Rulemaking: Understanding the 120-Day Timer

The FDIC just implemented something unprecedented—a statutory deadline that changes the regulatory approval dynamic.

If you've been reading the new GENIUS Act rulemaking and found yourself fighting the urge to close the tab, I don't blame you. On the surface, it looks like the bureaucratic equivalent of watching paint dry. Forms. Engagement letters. Definitions within definitions. The kind of regulatory plumbing that makes even compliance professionals reach for another coffee.

But here's the thing: If you stopped reading, you missed a significant shift in regulatory power dynamics.

Beneath layers of administrative detail is a 120-day timer that fundamentally changes the relationship between banks and their regulators. And it deserves closer examination.

What Deserves Closer Attention

Most commentary on the GENIUS Act rulemaking focuses on the surface level: "The FDIC is creating a framework for banks to issue stablecoins." "This represents regulatory clarity for digital assets."

That's accurate, but incomplete.

What's actually happening is more nuanced than the consensus take suggests. The FDIC is building a comprehensive regulatory framework that balances innovation with oversight—and includes mechanisms that create both opportunities and constraints.

Most notably, they've established a statutory deadline that fundamentally changes the approval dynamic.

Let me walk you through the three elements of this rulemaking that deserve strategic attention.

1. The 120-Day Approval Deadline: A Meaningful Change

This is the most significant provision, though it's easy to miss in the detail.

If the FDIC doesn't deny an application within 120 days, it's automatically approved.

This represents a departure from traditional regulatory approaches in financial services.

Historically, regulatory review processes have operated without fixed deadlines. Applications could remain pending indefinitely while regulators requested additional information, conducted supplemental reviews, or suggested applicants voluntarily withdraw and resubmit with modifications. While this approach allowed for thorough review, it also created uncertainty for applicants regarding timelines and outcomes.

This rule establishes a clear deadline.

Now, the FDIC must make an explicit decision—approve or deny—on the record, in writing, within 120 days. This creates more predictability for applicants and establishes accountability for the review process.

This is a notable shift. The statutory deadline changes the dynamic between regulator and applicant, requiring timely, documented decisions.

The practical question is: How will the FDIC manage this timeline? Will we see approvals for well-prepared applications, or will most decisions arrive near the deadline with detailed documentation supporting denials?

Time will tell, but the deadline itself represents progress toward more transparent regulatory processes.

2. The Two-Phase Approach: Timing Considerations

Here's an important structural element to understand.

The FDIC is accepting applications now. The application process is open and banks can begin submitting materials.

However: The detailed safety and soundness standards will be released in a subsequent phase.

This creates a strategic timing decision for banks. They can submit applications based on the current framework and general regulatory expectations, or they can wait for the more detailed requirements to be published.

This phased approach has precedent in regulatory rollouts. It allows the FDIC to gather initial applications and feedback while refining detailed standards based on real-world use cases and industry input.

From a bank perspective, this presents considerations:

• Early applicants may gain first-mover advantage and help shape how standards are interpreted, but face more uncertainty about specific requirements
• Later applicants will have clearer standards and can learn from earlier submissions, but may face competitive disadvantages if approvals come through quickly

Neither approach is inherently right or wrong—it depends on your institution's risk tolerance, competitive position, and strategic timeline.

If you're considering applying in this first wave, ensure you've carefully evaluated whether being a first mover aligns with your institution's risk appetite and resource availability.

3. The Tokenized Deposit Alternative: An Important Distinction

Here's a critical clarification that deserves attention.

The rule explicitly reinforces that tokenized deposits are NOT stablecoins. They're different instruments, subject to different regulatory treatment, and—critically—they don't require banks to navigate this new subsidiary framework.

This creates an alternative path for innovation.

If you're a bank that wants to leverage blockchain technology, tokenized deposits offer a different regulatory approach. You can deliver many similar benefits—programmability, instant settlement, 24/7 availability—under existing banking frameworks rather than this new structure.

This distinction matters strategically. Banks now have two paths for blockchain-based innovation:

1. The GENIUS Act framework - For issuing stablecoins, requires new subsidiary structure and this approval process
2. Tokenized deposits - For deposit-based tokens, operates under existing banking regulations

Both approaches have merit depending on your business model, target market, and strategic objectives. The key is understanding which path aligns with your institution's goals.

Expect innovation to occur along both paths. Some banks will pursue stablecoin issuance for specific use cases where that model makes sense. Others will focus on tokenized deposits where that better fits their strategy.

The framework provides multiple options—which is actually a positive outcome for the industry.

The Strategic Reality

Here's what this framework actually represents: The FDIC is creating a structured path for stablecoin issuance with comprehensive oversight.

This rulemaking balances innovation with regulatory oversight. It channels blockchain-based financial products into a regulatory structure where the FDIC maintains visibility and can ensure safety and soundness standards are met.

The framework isn't designed to be frictionless—it's designed to be prudent. That's consistent with the FDIC's mandate to protect depositors and maintain financial stability.

However—and this is the strategically interesting part—the 120-day deadline creates a meaningful constraint.

That statutory timer requires regulators to make decisions, to document rationales, to act within defined timeframes. It creates accountability and transparency in the approval process. And if banks prepare comprehensive applications that address safety and soundness considerations thoroughly, the deadline could work in their favor.

This is how regulatory frameworks should function: clear processes, defined timelines, documented decisions.

What Happens Next

We're entering new territory. The interaction between comprehensive regulatory oversight and statutory deadlines could produce several outcomes:

• Timely decisions with clear rationales: The FDIC reviews applications thoroughly and issues documented decisions within the deadline

• Refined Phase 2 standards: Detailed requirements are published that provide clear guidance on capital, operational, and compliance expectations

• Strategic approvals: Well-prepared applications that thoroughly address safety and soundness receive approval

• Diverse innovation paths: Banks pursue both stablecoin issuance and tokenized deposits based on their strategic objectives

Most likely? We'll see a combination. Some denials where applications don't meet regulatory standards. Some approvals for applications that demonstrate comprehensive risk management. And continued innovation along multiple paths as banks choose the approach that best fits their business model.

The real story of the GENIUS Act will be written in how banks strategically engage with the framework—and how the FDIC executes on its commitment to timely, transparent decision-making.

The statutory deadline creates accountability for both parties. That's a meaningful improvement in regulatory process.

The question is: what's your strategy for engaging with this framework?