Stablecoin

A stablecoin is a digital token built to hold a steady value by tracking an official currency, most often the US dollar. Unlike the volatile assets people associate with the word, a payment stablecoin is meant to be worth one dollar, and to stay there, because it is backed by a reserve of assets and, increasingly, by a legal right to redeem it at par. It is one of the newer forms of digital cash competing to carry value across the financial system.

From loosely defined to legally defined

Until recently, stablecoins operated with little formal regulation. That has changed on both sides of the Atlantic, which is why the term now carries a precise meaning for institutions.

In the United States, the GENIUS Act was signed into law in July 2025. It defines a payment stablecoin, sets who may issue one, and imposes hard reserve rules. Issuers must hold at least one-to-one backing in high-quality liquid assets such as US dollars and short-term Treasuries, and must publish the composition of those reserves every month. Only a permitted issuer may offer one: a subsidiary of an insured depository institution, a federally qualified issuer approved by the OCC, or a state qualified issuer. The requirements take full effect on the earlier of eighteen months after enactment or 120 days after final regulations, and the OCC and FDIC were issuing implementing rules through 2026.

In the European Union, MiCA has applied to e-money tokens, its category for currency-referencing stablecoins, since mid-2024. It restricts issuance to regulated institutions and requires issuers to issue and redeem tokens at par value on request. The through-line in both regimes is the same: force the token to be worth what it claims, and hold the issuer to it.

Why regulators care about par

The reason these laws focus so heavily on reserves and redemption is the singleness of money. If a privately issued token can drift below the value it references, and different issuers carry different credit quality, you risk a world where one dollar-token is not worth another. Requiring full backing and a right to redeem at par is how regulators keep private digital money anchored to the currency it represents.

That anchoring is also what makes a stablecoin usable in settlement. A well-regulated, fully-reserved stablecoin, redeemable at par, is one of several forms of digital cash, alongside tokenised deposits and central bank money, that institutions now weigh for moving value. The mid-2026 market gives a sense of scale: the total value of stablecoins in circulation was around $290 billion, dominated by a small number of large dollar issuers. The open question for settlement is not whether stablecoins exist, but whether they, tokenised deposits, and traditional money can settle against each other on shared programmable settlement infrastructure instead of in separate silos.