USBC responds to FDIC’s proposed Genius Act rule

Last week, USBC submitted a letter in response to the FDIC’s call for comment regarding its proposed rule for implementing the Genius Act.

In our letter, we expressed support for the FDIC’s proposed rule. Regulatory clarity is a tide that lifts all boats, paving the way for innovation in U.S. banking. Additionally, we provided comments on a range of topics including the use of blockchain and smart contracts.

As we opened in our comment letter:

The TD Proposal directly addresses products like USBC Tokenized Deposits, and the clarifications on the regulatory status of tokenized deposit products provided by the TD Proposal will help banks responsibly deploy innovative payment and settlement technologies while maintaining the safety and soundness of the U.S. banking system.

Here’s USBC USBC co-founder and CEO Greg Kidd (from today’s press release):

“We believe the FDIC proposal represents an important and responsible step forward to formalize the regulatory framework needed to help realize the full potential of tokenized deposits. Our comment on the treatment of tokenized deposits is aligned with the views expressed by a large group of other leading financial and tech organizations. USBC remains committed to ongoing engagement with federal regulators on technical matters related to tokenized deposits, the blockchain ledger, and smart contracts.”

And here’s the letter’s Executive Summary:

• “We strongly support the broad, technology-neutral principle advanced by the proposed amendment to 12 C.F.R. § 330.1(e) and the addition of 12 C.F.R. § 330.3(k).

• While we do not believe new rules are needed to address blockchain recordkeeping, we respectfully urge the FDIC to confirm in the final rule that a third-party-operated blockchain contractually designated as an IDI’s exclusive account-level ledger, to which the IDI maintains continuous API access, constitutes ‘deposit account records’ within the meaning of 12 C.F.R. § 330.1(e), and that those records are sufficient for deposit insurance determination purposes without requiring deposit account information be maintained in parallel by a traditional account-level ledger system.

• The capabilities of tokenized deposit products—including smart contract integration—do not inherently threaten such products’ characterization as deposits. The FDIC should rigorously evaluate whether smart contract logic disturbs an operative element of the definition of ‘deposit’ in the Federal Deposit Insurance Act (the ‘FDI Act’), with a presumption in favor of maintaining the deposit characterization.”

Read USBC’s full letter to the FDIC here.