The passage of the GENIUS Act for stablecoins in the United States has encouraged numerous stablecoin papers and posts. A key concern is what happens if something goes wrong.
A post this week from the American Enterprise Institute (AEI) argues for a change in the FDIC rules. If a bank collapses holding stablecoin balances, then the FDIC deposit insurance claims of any stablecoin issuer should be subordinated to all other deposit holders.
When Silicon Valley Bank (SVB) went under in 2023, USDC stablecoin issuer Circle had deposits of $3.3 billion, resulting in the de-pegging of the $40 billion stablecoin. Given the size of the account, these were uninsured deposits. Luckily for Circle, the US Treasury decided to bail out all deposit holders.
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