Every bank that looks at tokenization gets the same first question from its board, and later from its customers. The FDIC answered it in April 2026. In its proposed rule implementing the GENIUS Act, the agency stated that the application of deposit insurance does not depend on the technology or recordkeeping a bank uses to record its deposit liabilities. Put simply, a deposit recorded as a token is still a deposit.
That sentence settles less than it seems to. Insurance has always followed the depositor and the ownership category, not the instrument, and tokenization makes it easier to lose track of both. This guide covers what the regulators have said, where the line with payment stablecoins sits, and the design choices that keep a tokenized deposit on the right side of it.
What the FDIC and the statute say
Three sources matter, and they agree with one another.
- The FDIC proposal. On April 7, 2026 the FDIC issued a notice of proposed rulemaking on GENIUS Act requirements and standards (FIL-11-2026). It says deposit insurance does not turn on the technology used to record a deposit. It also says that deposits held as reserves backing a payment stablecoin would not be insured to stablecoin holders on a pass-through basis.
- The GENIUS Act. The definition of "payment stablecoin" in section 2 excludes a deposit as defined in the Federal Deposit Insurance Act, including a deposit recorded using distributed ledger technology. Section 16 adds that nothing in the Act limits a depository institution's authority to accept deposits or to issue digital assets that represent them. The text of Public Law 119-27 is worth reading in full.
- The FDIC Chairman's statement. Issued with the proposal, it confirms that deposits in tokenized form remain deposits and invites comment on what further guidance the industry needs.
One caution. The FDIC text is a proposal. Read the final rule when it is published before relying on any detail in a product disclosure.
What "insured" means for a token
The standard coverage is $250,000 per depositor, per FDIC-insured bank, for each account ownership category. Tokenization does not raise that amount, split it, or attach it to a wallet. A tokenized deposit is insured the way the underlying deposit is insured, subject to ownership category and limits.
Three practical consequences follow.
- The bank must always know who the depositor is. Coverage is determined from the bank's records of ownership. If a token can move to a party the bank has not identified, the bank cannot say whose deposit it is.
- Insurance covers bank failure, nothing else. It does not cover a stolen key, a fraudulent transfer or an operational error. Those are control problems, and they belong in the bank's risk program.
- Balances aggregate. A customer's tokenized balance counts together with that customer's other deposits in the same ownership category at the same bank.
This is why most bank designs keep tokenized deposits in a closed loop of verified customers. The loop is what lets the bank answer the ownership question at any moment.
Why a payment stablecoin is different
A payment stablecoin is issued by a permitted payment stablecoin issuer, backed at least one to one by reserves, and redeemable at par. The holder has a claim on the issuer. The holder is not a depositor of the bank where the reserves sit.
| Question | Tokenized deposit | Payment stablecoin |
|---|---|---|
| What is it legally | A deposit liability of the bank | An obligation of a permitted issuer backed by reserves |
| FDIC insurance for the holder | Yes, as a deposit, subject to ownership category and limits | No. Under the FDIC proposal, reserves are not insured to holders on a pass-through basis |
| Interest to the holder | Permitted, as on any deposit | Prohibited by section 4 of the GENIUS Act |
| Who can hold it | The bank's identified customers | Any eligible holder on an open network, with screening |
| Governing framework | Existing deposit law and supervision | The GENIUS Act and its implementing rules |
Neither instrument is better. They do different jobs, and we explain how the two fit together in tokenized deposits vs stablecoins.
Design choices that keep a deposit a deposit
The legal answer depends on what the bank actually builds. These are the choices we see deciding it.
- Fix the legal nature at issuance. A token should be a deposit or a stablecoin from the moment it exists. A token that changes character depending on who holds it leaves the classification question open for as long as it circulates.
- Reconcile token balances to the deposit ledger. The ledger entry and the core record must describe the same liability. Examiners will ask to see the reconciliation.
- Make conversion an explicit event. When a customer moves from a tokenized deposit to a stablecoin, the customer leaves deposit insurance. That step should be a recorded, disclosed transaction and never a side effect of a transfer.
- Write disclosures that match the instrument. A stablecoin must never be described as insured. A tokenized deposit should carry the same insurance language as the account behind it.
Our Regulated Money Platform is built on that separation. Two token classes share one compliance backbone. Each has its legal nature fixed at mint, and conversion between them is a single burn and mint in the customer's own wallet, recorded on the same audit trail. The design is patent-pending.
What a board should do now
- Ask counsel for a short classification memo on the instrument you intend to offer, citing the FDIC proposal and section 2 of the Act.
- Decide which job each instrument will do. Cash management among your own customers points to a tokenized deposit. Open-network and cross-border payments point to a stablecoin.
- Review how your records identify the owner of every tokenized balance, including after a transfer.
- Track the rulemaking. Our bank-by-regulator guide to the proposed rules lists each docket.
- Bring your compliance team to a working session. We will walk through the design with you.
Frequently asked questions
Are tokenized deposits FDIC insured?
A tokenized deposit that meets the legal definition of a deposit at an FDIC-insured bank is insured like any other deposit, subject to ownership category and limits. The FDIC's April 2026 proposal states that deposit insurance does not depend on the technology or recordkeeping used to record the liability. The proposal is not yet a final rule.
Does deposit insurance follow the token when it is transferred?
Insurance follows the depositor, not the token. Coverage is determined from the bank's records of who owns the deposit and in which ownership category. If a token moves to a person the bank has not identified as its customer, the bank cannot establish whose deposit it is. That is why closed-loop designs restrict transfers to verified customers.
Are payment stablecoins FDIC insured?
No. A payment stablecoin is an obligation of its issuer, backed by reserves, and the holder is not a depositor. Under the FDIC's proposed rule, deposits held as reserves backing a payment stablecoin would not be insured to stablecoin holders on a pass-through basis. Describing a stablecoin as insured would misstate the product.
Does the GENIUS Act apply to tokenized deposits?
The Act regulates payment stablecoins and their issuers. Its definition of payment stablecoin excludes deposits, including deposits recorded using distributed ledger technology, and section 16 preserves a bank's authority to issue digital assets that represent deposits. A tokenized deposit therefore remains under existing deposit law and supervision.
Can a tokenized deposit pay interest?
Yes. It is a deposit, so the bank may pay interest on it as on any other deposit account. A payment stablecoin cannot: the GENIUS Act prohibits a permitted issuer from paying holders any form of interest or yield. This difference is one of the main reasons banks keep both instruments distinct.
This article is general information, not legal advice. Deposit insurance determinations depend on the facts of each account. Consult your counsel and your primary regulator.