A dollar stablecoin and a tokenized bank deposit can look identical in a wallet: a token worth one dollar that moves on a ledger in seconds. The difference shows up when something goes wrong. With a tokenized deposit, a bank owes you the money, and the ordinary deposit-insurance rules apply. With a payment stablecoin, an issuer owes you redemption from a pool of reserves, and U.S. law says that pool is not insured for you.
This guide sets out that difference using the U.S. framework: the GENIUS Act, signed on July 18, 2025, and the regulators’ proposals to implement it. Other countries draw the line in their own laws.
Two promises behind the same token
A payment stablecoin is defined in the GENIUS Act as a digital asset used for payment or settlement whose issuer is obligated to redeem it for a fixed amount of money and says it will keep a stable value. The issuer must hold identifiable reserves at least 1 to 1 against the coins outstanding, limited to cash, Federal Reserve balances, deposits at insured banks, short-dated Treasury bills and certain overnight repurchase agreements, and must publish a redemption policy with its fees.
A tokenized deposit is a bank deposit recorded with distributed-ledger technology. The GENIUS Act’s definition of a payment stablecoin expressly excludes a deposit, “including a deposit recorded using distributed ledger technology.” The token is the bank’s record of what it owes you, not a separate asset.
| Question | Payment stablecoin (GENIUS Act) | Tokenized deposit |
|---|---|---|
| Who owes you the dollar | The permitted issuer | The bank that took the deposit |
| What backs it | Segregated reserves, at least 1 to 1 | The bank’s balance sheet, capital and supervision |
| FDIC insurance for the holder | No; the law forbids it | Same rules as any deposit, up to the limit |
| Interest from the issuer for holding it | Prohibited | Allowed, as with other deposits |
| If the issuer or bank fails | Holders have priority on the required reserves | Deposit-insurance payout rules apply |
Deposit insurance: the clearest line
Section 3(e) of the GENIUS Act says payment stablecoins “shall not be backed by the full faith and credit of the United States,” guaranteed by the government, or “subject to deposit insurance” by the FDIC. It also makes it unlawful to market them as insured.
The reserves themselves may sit in insured banks, which raises an obvious question: does that insurance pass through to coin holders? The FDIC’s proposed rule of April 7, 2026 says no. Under the proposal, reserve deposits would be insured to the issuer as a corporate depositor, not to stablecoin holders on a pass-through basis.
The same proposal states that a tokenized deposit meeting the statutory definition of a deposit is treated no differently from any other deposit. In the Federal Register text, the FDIC says a bank’s “choice of technology or recordkeeping” is not relevant to deposit-insurance coverage. FDIC Chairman Travis Hill’s statement describes this as reaffirming “that deposits in tokenized form remain deposits.”
That is a proposal, not a final rule. Insurance also has limits: a tokenized deposit is covered under the same ownership categories and per-depositor limit as an ordinary account at the same bank, not in addition to them.
Why a stablecoin issuer cannot pay you interest
Section 4(a)(11) of the Act prohibits a permitted or foreign payment stablecoin issuer from paying holders “any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention” of the coin.
Reserve assets such as Treasury bills can earn income, but the Act does not let the issuer pass it to holders as interest. A bank can pay interest on a deposit, tokenized or not, because that is an ordinary deposit product.
Rewards you see advertised on stablecoin balances usually come from somewhere other than the issuer, such as a platform’s own program or lending. Our guide to where stablecoin yield comes from traces those sources and their risks.
A worked example
Suppose a company keeps $400,000 for supplier payments. It could hold that amount as a dollar stablecoin in its wallet, or as a tokenized deposit at its bank. Both settle on a ledger.
- If the stablecoin issuer fails, the GENIUS Act gives coin holders priority over other creditors on the required reserves, shared ratably among holders. Recovery depends on those reserves and on the insolvency process. No FDIC payout applies.
- If the bank fails, the tokenized deposit is a deposit claim. Standard FDIC coverage protects up to $250,000 per depositor, per insured bank, per ownership category; in this example the remaining $150,000 would be uninsured and paid from the bank’s estate.
The example is hypothetical and ignores other accounts the company might hold at the same bank, which count toward the same limit.
Where each token can travel
A stablecoin is designed to circulate among people who never deal with the issuer: wallets, exchanges and payment apps. That is why it can work across platforms, and why the issuer’s redemption policy and reserve reports matter to every holder.
A tokenized deposit usually stays inside a bank’s own system, or among banks that have agreed to settle with each other. Our report on IBM’s Swift link for its digital-asset beta is one example of that bank-side infrastructure. For what happens when a stablecoin reaches a shop’s checkout, see stablecoin payments from wallet to merchant payout.
What is still being decided
The Act takes effect on the earlier of January 18, 2027, which is 18 months after enactment, or 120 days after the regulators issue final implementing rules. The OCC proposed its rules on February 25, 2026, the FDIC on April 7, 2026 and the Federal Reserve on September 29, 2026, with comments open until November 30. Details such as capital, reserve concentration and the pass-through question can still change before final rules.
