What stablecoins are
A stablecoin is a token issued on a blockchain whose value is pegged to a reference asset, almost always a fiat currency (dollar, euro). Unlike bitcoin, it aims for stability, not appreciation (1 USDC ≈ $1). That stability makes it a candidate for payments: this “money” moves 24/7, in seconds, on programmable infrastructure and without layers of correspondent banks. The market is overwhelmingly dollar-based. More than 99% of market capitalization is denominated in USD, and the euro remains marginal.
MiCA: the EU framework
The MiCA regulation (Markets in Crypto-Assets, 2023/1114) made the EU the first major jurisdiction to regulate stablecoins comprehensively. It distinguishes e-money tokens (EMTs, backed by a single fiat currency, such as USDC or EURC) from asset-referenced tokens (ARTs, backed by baskets of assets). Issuing an EMT in the EU requires authorization as an e-money institution (or a credit institution). A compliant stablecoin is therefore legally e-money. It just happens to be recorded on a blockchain.
- 1:1 reserves: safe, liquid, segregated assets, with a minimum share held in bank deposits; regular audits and disclosure.
- Redemption at par, at any time, free of charge for the holder, ending restrictive redemption clauses.
- Ban on paying interest on EMT holdings (no yield for holders).
- “Significant” stablecoins: stricter requirements (own funds, EBA supervision).
- Monetary safeguard: an EMT denominated in a non-EU currency and widely used as a means of exchange can have its use capped (threshold: 1 million transactions and €200 million a day). The EU is shielding the euro from stablecoin dollarization.
| Token | Issuer | MiCA status | Payment use |
|---|---|---|---|
| USDC | Circle (EMI authorized by the ACPR) | ✅ compliant (EMT) | the benchmark for B2B flows and PSP integrations in the West |
| EURC | Circle (same authorization) | ✅ compliant (EMT) | the leading euro stablecoin, still small but growing |
| USDT | Tether (El Salvador) | ❌ noncompliant, delisted for EU customers | dominates global trading and emerging uses (Asia, Latin America, Africa) |
Payment use cases
Cross-border B2B is where the gap with existing rails is widest. On a corridor from Europe to West Africa or Latin America, a SWIFT transfer can cost €20 to €50 and take 2 to 5 days, at an opaque exchange rate. A USDC transfer settles in minutes for a few cents in network fees, and conversion to local currency remains the main cost. In the euro area, where instant transfers cost no more than standard transfers, stablecoins offer nothing for domestic payments. Their advantage is limited to corridors where traditional rails are slow and costly.
What Visa, Mastercard, and the payment giants are doing
The card networks have adopted stablecoins as a settlement asset, without changing either the card experience or the merchant's acceptance flow. Since 2023, Visa has settled part of its obligations with certain acquirers (Worldpay, Nuvei) in USDC on Solana and Ethereum. The cardholder pays by card as usual, and settlement between the network and the acquirer happens on-chain, weekends included. Mastercard follows the same logic, with its Multi-Token Network and its partnerships with Paxos and Circle. In both cases, the card remains the cardholder's interface, and the blockchain comes in only at settlement, as an option.
- Visa: USDC settlement with Crypto.com (2021), then Worldpay and Nuvei (2023); the VTAP platform (2024) to help banks issue tokens; benchmark on-chain studies.
- Mastercard: Multi-Token Network, co-branded crypto cards, stablecoin settlement with regulated issuers.
- Stripe: acquisition of Bridge (stablecoin infrastructure, about $1.1B, closed in early 2025) and the return of USDC payments, the boldest bet by any Western PSP.
- PayPal: launched its own stablecoin, PYUSD (with Paxos, 2023), used for supplier payments and P2P.
- Société Générale-FORGE: a regulated bank subsidiary issuing a euro stablecoin (EURCV), proof that banks can issue their own.
- In the US, the GENIUS Act (2025) creates a federal framework for payment stablecoins and is speeding the entry of banks and retail giants.
Risks: depegs, AML, and operational limits
| Risk | Example | Mitigation |
|---|---|---|
| Depeg (loss of the peg) | USDC at $0.87 in March 2023 ($3.3B in reserves frozen at Silicon Valley Bank); UST near $0 in May 2022 | high-quality reserves, bank diversification, transparency (attestations), MiCA framework |
| Run (mass redemptions) | doubts about reserves trigger cascading redemptions, the crypto version of a bank run | highly liquid assets, guaranteed redemption at par, supervision |
| AML/CFT and sanctions | pseudonymous transfers, mixers, sanctioned addresses (Tornado Cash) | TFR Regulation 2023/1113 (crypto travel rule), on-chain analytics, address freezes by the issuer |
| Issuer counterparty | the user holds a claim on the issuer, not an insured deposit | EMI authorization, ring-fenced reserves, audits, but no deposit insurance |
| Blockchain operations | congestion, variable fees, irreversible address errors, key custody | high-performance chains, qualified custody, address controls (whitelisting) |
- Accounting and tax: a company holding stablecoins faces classification questions (digital asset or cash equivalent), and converting to euros immediately remains the prudent practice.
- Concentration: two issuers hold most of the market; an incident at either one would be systemic for the crypto ecosystem.
- Dollarization: for the EU and emerging economies, a ubiquitous dollar stablecoin raises a monetary sovereignty issue, which is what MiCA's caps on non-euro EMTs are designed to address.
In short, a MiCA-style regulated stablecoin is getting close to high-performance e-money. Its residual risks are banking risks (reserve quality, runs), and its new risks are technical (blockchain, key custody). Its use is concentrated in corridors that existing rails serve poorly, and it is not a general substitute for Europe's domestic payment systems.
The digital euro as a counterpoint
The digital euro is a retail central bank digital currency (CBDC) project that the ECB is preparing in response to private stablecoins. It would be a direct claim on the central bank, with no counterparty risk: the digital equivalent of a banknote. The project explicitly addresses two threats identified by the ECB: Europe's dependence on international card schemes for retail payments, and the creeping dollarization that a dominant USD stablecoin in everyday payments would bring.
| Feature | Stablecoin (MiCA EMT) | Digital euro (CBDC) | Bank deposit (commercial bank money) |
|---|---|---|---|
| Issuer | licensed private company (EMI) | European Central Bank | commercial bank |
| Claim on | the issuer (segregated reserves) | the central bank, zero risk | the bank (deposit insurance: in France, the FGDR, up to €100,000) |
| Infrastructure | public blockchains, 24/7 | Eurosystem infrastructure, 24/7, offline mode planned | interbank systems (SEPA, TARGET) |
| Programmability | high (smart contracts) | conditional payments envisaged, but not programmable money by design | via bank APIs (open banking) |
| Holding limit | none (usage caps possible for non-euro EMTs) | individual limit envisaged (about €3,000, under debate) to protect bank funding | none |
| Interest | banned (MiCA) | none | possible |
Elsewhere in the world. The same mechanism, elsewhere.
Licensing and reserve rules for a fiat-backed stablecoin issuer
In the US, the GENIUS Act (Public Law 119-27, signed into law on July 18, 2025) requires issued stablecoins to be backed “on an at least 1 to 1 basis” by an exhaustive list of reserves: US coins and currency, including Federal Reserve notes; demand deposits at insured banks; Treasury bills maturing in 93 days or less; overnight repurchase agreements; and shares of government money market funds. A state-licensed issuer whose consolidated outstanding issuance exceeds $10 billion must move under federal supervision within 360 days or stop issuing.
GENIUS Act, Public Law 119-27 — https://www.govinfo.gov/content/pkg/PLAW-119publ27/html/PLAW-119publ27.htm
In Hong Kong, the Stablecoins Ordinance (Cap. 656) took effect on August 1, 2025. Issuing a fiat-referenced stablecoin there is a regulated activity that requires a license from the Hong Kong Monetary Authority (HKMA). The licensee must maintain, at all times, paid-up share capital of at least HK$25 million and reserve assets that are high quality, highly liquid, and of minimal investment risk, segregated for each type of stablecoin issued.
Hong Kong Monetary Authority, Guideline on Supervision of Licensed Stablecoin Issuers, §2.3.1 and §5.1.1 — https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/stablecoin-issuers/
In Singapore, the framework the Monetary Authority of Singapore (MAS) finalized in August 2023 covers only single-currency stablecoins pegged to the Singapore dollar or a G10 currency and issued in Singapore. It sets rules for the composition, valuation, custody, and audit of reserve assets, and the issuer must hold minimum base capital and liquid assets sufficient for an orderly wind-down of its business.
Monetary Authority of Singapore — https://www.mas.gov.sg/news/media-releases/2023/mas-finalises-stablecoin-regulatory-framework
In Japan, the stablecoin framework stems from the 2022 amendment to the Payment Services Act, which took effect in June 2023. The FSA defines stablecoins as tokens issued at a price linked to the value of a fiat currency and redeemable at the issue price. It treats them as “electronic payment instruments,” separate from crypto-assets, and the intermediaries that handle them fall under a dedicated category: Electronic Payment Instruments Service Provider.
Financial Services Agency, Discussion Paper — Examination of the Regulatory Systems Related to Cryptoassets, April 2025 — https://www.fsa.go.jp/en/news/2025/20250410_2/01.pdf
How fast a stablecoin must be redeemed at par
In Hong Kong, the HKMA requires every valid redemption request to be honored “as soon as practicable,” without unreasonable fees or unduly burdensome conditions. Unless the authority has given prior written consent, the request must be processed within one business day after the day it is received.
Hong Kong Monetary Authority, Guideline on Supervision of Licensed Stablecoin Issuers, §3.3.3 — https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/stablecoin-issuers/
In Singapore, MAS requires the issuer of a single-currency stablecoin to return the par value to the holder within five business days of a redemption request.
Monetary Authority of Singapore — https://www.mas.gov.sg/news/media-releases/2023/mas-finalises-stablecoin-regulatory-framework
In the US, the GENIUS Act sets no specific deadline. It requires the issuer to publish its redemption policy, which must establish “clear and conspicuous” procedures for timely redemption. Only the competent regulator (a state regulator, the FDIC, the OCC, or the Federal Reserve) can impose discretionary limits on those redemptions.
GENIUS Act, Public Law 119-27, §4(a)(1)(B) — https://www.govinfo.gov/content/pkg/PLAW-119publ27/html/PLAW-119publ27.htm
The ban on paying interest to stablecoin holders
In the US, the GENIUS Act bars any licensed issuer, domestic or foreign, from paying holders “any form of interest or yield (whether in cash, tokens, or other consideration)” solely for holding, using, or retaining the stablecoin. Whether the ban also covers exchanges that hold stablecoins in custody is still being debated in Congress.
GENIUS Act, Public Law 119-27 — https://www.govinfo.gov/content/pkg/PLAW-119publ27/html/PLAW-119publ27.htm; Congressional Research Service, IF13174, “The Stablecoin Yield Debate”
In Hong Kong, the HKMA sets the same rule under the heading “Non-interest bearing”: a licensee must not pay, or let anyone else pay, any interest or interest-like incentive to holders of its stablecoins. Income from managing the reserves, including interest, stays with the issuer.
Hong Kong Monetary Authority, Guideline on Supervision of Licensed Stablecoin Issuers, §2.6 — https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/stablecoin-issuers/