In that case, and with the caveat that deposit insurance is wired and uncertain at the best of times, that makes stablecoin a regulated bank.

This makes it for for the user. I don't see how a bank can comply with banking law though. How does a bank prevent criminals, sanctioned orgs, money launderers or whatnot from using it?

It's possible that regulators will leave a loophole like this in play. They aren't always sharp.

What that is, is a bank where account are a wallet. It's still a USD bank account.