It is my understanding that, while any entity can create dollar-denominated assets (stocks and bonds) and sell them on the open market, only banking institutions in the United States can engage in fractional reserve banking and thus truly increase the supply in US Dollar funds.
These funds are liabilities of the banking system as a whole to deposit holders and I am certain must be regulated in some way. What does an institution need to do to have this powerful ability to create new USD funds? Is it to be part of the Federal Reserve System? Is it to join the FDIC -- some state banks are outside the Federal Reserve System? Is it to be subject to other regulations and requirements to take deposits at all?