Stablecoin
Also called payment stablecoin, fiat-backed token
A stablecoin is a crypto-asset designed to hold a stable value by tracking a currency such as the US dollar or euro, or another asset, usually backed by reserves held by the issuer. Stablecoins are used for crypto trading, payments and settlement, and are subject to dedicated laws in the EU, UK and US.
How it works
A fiat-backed stablecoin issuer takes in money, mints tokens of equal value and holds reserves, such as cash and short-term government debt, to meet redemptions. Holders can redeem tokens at par with the issuer, while most trading happens on exchanges and blockchains. Algorithmic stablecoins, which rely on code and market incentives instead of reserves, have collapsed in the past and do not meet the reserve requirements of the new laws.
In the EU, MiCA splits stablecoins into e-money tokens, which track one official currency, and asset-referenced tokens, which track a basket or other assets. The US GENIUS Act creates a licensing regime for payment stablecoin issuers, and the UK brings UK-issued stablecoins under FCA authorisation through the Cryptoassets Regulations 2026. Compliance teams treat stablecoin transfers like other crypto transfers, with screening, travel rule checks and issuer due diligence.
The rules
Require authorisation, reserve assets, a white paper and redemption rights; e-money tokens can only be issued by credit institutions or e-money institutions.
Issuers of stablecoins offered or traded in the EULimits payment stablecoin issuance to permitted issuers that hold one-to-one reserves, publish monthly reserve reports and follow Bank Secrecy Act rules; the OCC issued its final rule on 21 October 2026.
Payment stablecoin issuers and firms offering stablecoins in the USBring stablecoin issuance in the UK into FCA authorisation, with rules on backing assets, redemption and disclosure; systemic stablecoins also fall under the Bank of England.
Issuers of UK qualifying stablecoinsCommon questions
What is the difference between an e-money token and an asset-referenced token?
Under MiCA, an e-money token tracks the value of one official currency, such as the euro. An asset-referenced token tracks another value or right, or a combination, such as a basket of currencies or commodities.
Are stablecoin issuers banks?
Not necessarily. In the EU, e-money tokens must be issued by a credit institution or e-money institution. In the US, permitted issuers include subsidiaries of insured banks, federally qualified non-bank issuers and state-qualified issuers.
Do AML rules apply to stablecoins?
Yes. Transfers between providers fall under travel rule requirements, and issuers can freeze tokens linked to sanctioned or criminal addresses. The GENIUS Act treats US permitted issuers as financial institutions for Bank Secrecy Act purposes.
