Stablecoin Regulation: An Overview for Issuers and Exchanges

Stablecoins now settle hundreds of billions monthly. Rules are catching up. This guide cuts through global and local frameworks (U.S., EU, Singapore, UAE, Hong Kong) so founders and compliance teams can choose jurisdictions, design reserves/redemptions that pass audits, and avoid licensing landmines.

TL;DR

• All major jurisdictions require full reserve backing, redemption at par, and strict AML/CFT compliance.
• Rules differ on who can issue (banks vs. non-banks), minimum capital levels, and whether non-local currency tokens face restrictions.
• Choosing a peg (single fiat vs. basket) defines the regulatory path in the EU, while the U.S. and Singapore tie frameworks to supporting their own currencies.
• Issuers must align stablecoin design with jurisdictional rules, secure sufficient capital, and pick markets where regulatory goals match their business strategy.

Why Countries are Regulating Stablecoins

Stablecoin regulations help to mitigate critical risks to the financial system. Common goals shared by countries introducing domestic frameworks for governing stablecoins include:

• Preserving financial stability: Preventing “run risk,” where sudden mass redemptions might force sales of reserve assets below the pegged value and disrupt funding markets.
• Ensuring consumer protection: Safeguarding users by ensuring issuers are trustworthy, reserves are sufficient, and holders can redeem tokens at par value.
• Combatting illicit finance: Enforcing strict Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) rules to reduce the risk of stablecoins being misused.
• Protecting monetary sovereignty: Addressing concerns over “stealth dollarization,” where reliance on foreign-currency-pegged stablecoins could weaken national monetary policy.

International Stablecoin Regulatory Framework

Regulators at the global level encourage responsible innovation and establish guidance that provides sufficient flexibility for jurisdictions to implement domestic approaches.

Financial Stability Board (FSB)

The Financial Stability Board (FSB) is an international body leading efforts to establish common principles that guide the governance of stablecoins. It applies the technology-neutral principle of “same activity, same risk, same rules” to stablecoins. By focusing on their economic function and potential risks rather than the underlying technology, the FSB aims to align stablecoin regulation with traditional financial oversight norms.

The FSB classifies tokens with strong potential for cross-border use as Global Stablecoins (GSCs). These tokens attract more regulatory scrutiny because of the financial stability risks they may introduce, both at the domestic and international levels.

Key Recommendations of the FSB

The FSB recommends a specific approach to regulating GSCs and stablecoins with potential for global adoption. Domestic stablecoin laws are expected to meet the following criteria.

• Comprehensive oversight: Authorities should have sufficient tools and powers to regulate, supervise, and oversee stablecoins and enforce relevant laws.   
• Robust risk management: Issuers must implement effective risk management frameworks, particularly regarding operational resilience, cybersecurity, and compliance with AML/CFT rules.
• Clear redemption rights: Users need a guaranteed legal right to redeem their stablecoins. For stablecoins pegged to a currency like the US dollar, this means always getting a 1:1 value back.  
• International cooperation: Regulators should collaborate and share information across borders to provide consistent and thorough oversight of the global stablecoin market.

Bank for International Settlements (BIS)

The Bank for International Settlements (BIS) takes a cautious view, arguing that privately issued stablecoins fall short of essential qualities of “sound money,” such as consistency of value and the ability to expand or contract supply as needed.

It warns of major risks, including financial instability from the forced sale of reserve assets, misuse for illicit finance, and erosion of monetary sovereignty. To mitigate these issues, the BIS calls for tailored regulatory frameworks and stronger liquidity risk management.

In practice, implementation remains uneven — the U.S. approach seeks to reinforce the dollar’s global role while the EU’s MiCA framework prioritizes protecting the euro, resulting in competing regulatory strategies.

Comparing Compliance Requirements Across Jurisdictions

Jurisdiction	Authorized Issuers	Reserve	Capital	Redemption Rights
U.S.	Banks & OCC-approved non-banks; state regimes if certified	1:1 backing with USD currency, bank deposits, or short-term Treasuries	To be established by federal regulators	Issuers must establish and disclose procedures
EU (EMTs)	Credit institutions or EMIs	At least 30% in segregated bank deposits; remainder in low-risk assets	Governed by the Electronic Money Directive 2 (EMD2)	At par, at any time upon request
EU (ARTs)	Credit institutions or EU-based legal entities with an ART license	Fully segregated reserves equal to circulating ARTs	Highest of: €350,000; 2% of the average reserve assets; or 25% of the prior year's fixed overheads.	At the market value of the referenced assets (or delivery in kind)
Singapore	Banks (exempt) & non-banks with MPI license > 5M SGD issuance	100% in cash, equivalents, or short-term sovereign debt in peg currency; segregated and attested monthly	Higher of 1M SGD or 50% of annual operating expenses	At par, within five business days
Abu Dhabi	Entities licensed for money services	Fully 1:1 fiat-backed only; algorithmic stablecoins banned	Subject to licensing requirements	Implied by the money services regulation
Dubai (VARA)	Entities licensed by VARA	Maintain reserves, redemption rights, and white paper disclosures; AED stablecoins under CBUAE	Based on activities and overhead costs (AED 100k - 1.5M)	Covered by VARA rulebooks
Hong Kong	Licensed issuers approved by the HKMA	Full reserve backing with high-quality, liquid assets; segregated custody required	Minimum paid-up share capital of HKD 25M	Issuers must disclose the redemption mechanism and procedures

U.S. Stablecoin Regulation

U.S. regulators are moving towards a unified national standard for stablecoin issuance. The framework defines payment stablecoins, sets strict reserve and compliance requirements, and establishes a dual federal-state oversight system.

The GENIUS Act of 2025

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 is the first federal framework for stablecoins in the United States. Signed into law on July 18, 2025, the GENIUS Act creates a dual regulatory system that permits stablecoin issuers to choose between federal and state oversight. Issuers can seek a federal charter from the OCC or, if their circulation is under $10 billion, operate under a state regime.

The GENIUS Act defines a “payment stablecoin” as a digital asset used for payments that issuers must redeem at a fixed value. It excludes qualifying payment stablecoins from the legal definitions of “security” and “commodity.” This resolves jurisdictional conflicts between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) and gives issuers clear rules.

Both banks and non-bank entities may issue stablecoins under the GENIUS Act. Bank subsidiaries may do so directly, while non-banks can apply for approval from the Office of the Comptroller of the Currency (OCC).

Issuers are required to maintain 1:1 reserves in high-quality liquid assets. Permitted reserves are limited to: 

• U.S. coins and currency
• Demand deposits at insured depository institutions
• Short-term U.S. Treasury bills

The GENIUS Act also classifies approved issuers as “financial institutions” under the Bank Secrecy Act (BSA), subjecting them to full AML/CFT requirements, including compliance programs, customer due diligence, and suspicious activity reporting.

U.S. Stablecoin Regulatory Structure 

Before the GENIUS Act, the U.S. stablecoin regulatory landscape was shaped by distinct and often conflicting approaches of key federal agencies.

• SEC: Previously relied on enforcement, often treating stablecoins as unregistered securities. In April 2025, it clarified that “covered stablecoins” are not securities if fully backed 1:1 by low-risk assets, redeemable at par, and not marketed for profit.
• CFTC: Historically treated stablecoins as commodities, using that authority in enforcement actions like the Tether case. The GENIUS Act now removes payment stablecoins from the definition of commodity, limiting the CFTC’s role.
• Treasury: The U.S. Department of the Treasury has long highlighted run risk and illicit finance concerns, pushing for regulation.
• Federal Reserve: The U.S. Federal Reserve has recently adopted a liberal stance, lifting restrictions on banks’ crypto activity and hosting events on payments innovation.

To prevent states from offering weak rules to attract business, the GENIUS Act establishes the Stablecoin Certification Review Committee (SCRC), led by the Secretary of the Treasury and including heads of the Federal Reserve and Federal Deposit Insurance Corporation (FDIC).

The SCRC is mandated to certify that state regimes meet standards substantially similar to federal rules. States may handle day-to-day supervision, but federal regulators retain back-up enforcement authority in exceptional cases.

At the state level, the New York State Department of Financial Services (DFS) set the early standard for stablecoin regulation. Its BitLicense regulation, issued in 2015, served as a precedent for the federal rules established in the GENIUS Act.

The New York DFS also issued a guidance charter in 2022 requiring USD-backed stablecoins to be 1:1 backed with conservative assets, redeemable at par within two business days, and subject to monthly public attestations by an independent CPA.

EU Stablecoin Regulation

The European Union regulates crypto-assets, including stablecoins, under the Markets in Crypto-Assets (MiCA) Regulation. MiCA unifies the market by introducing the “European passport,” which lets an issuer authorized in one country operate throughout the EU.

All stablecoin issuers are obliged to comply with certain mandatory requirements under MiCA.

• White paper: Issuers must publish a detailed white paper with information on the issuer, token design, stabilization mechanism, holder rights, and risks. Management is liable for misleading information.
• Significant tokens: Tokens with more than 10 million users or over €5 billion in market cap face stricter rules, including higher capital standards and direct EBA supervision.
• Transaction caps: Significant stablecoins not pegged to the euro are limited to €200 million in daily transactions to protect Euro monetary sovereignty.

MiCA divides stablecoins into two categories:

• E-Money Tokens (EMTs), pegged to a single fiat currency.
• Asset-Referenced Tokens (ARTs), pegged to a basket of assets.

The choice of peg determines the regulatory path an issuer must follow.

Requirements	E-Money Tokens (EMTs)	Asset-Referenced Tokens (ARTs)
Authorized Issuers	Must be an authorized Credit Institution or an Electronic Money Institution (EMI) under existing EU directives.	Must be a Credit Institution or a legal entity established in the EU that has obtained a specific ART issuer authorization from its national regulator.
Reserves	Issuers must safeguard all funds received. At least 30% must be held in segregated bank accounts, with the remainder in secure, low-risk liquid assets.	Issuers must maintain a reserve of assets legally and operationally segregated from the issuer's own funds, with a market value at least equal to the value of ARTs in circulation.
Capital	Governed by the Electronic Money Directive 2 (EMD2)	Issuers must hold "own funds" equal to the highest of: €350,000;  2% of the average reserve assets; or  25% of the prior year's fixed overheads.
Additional Obligations	Holders have the right to redeem tokens at par value at any time. Issuers are prohibited from paying interest to holders.	Holders have the right to redeem tokens at any time from the issuer. The reserve must be independently audited every six months.

Singapore Stablecoin Regulation

The Monetary Authority of Singapore (MAS) has created a framework that recognizes only a curated category of “MAS-regulated stablecoins.” This label is a seal of approval, aimed at attracting reputable issuers who are aligned with Singapore’s standards of trust and stability.

MAS-regulated stablecoins are covered by amendments to the Payment Services Act (PSA), which introduce “Stablecoin Issuance Service” as a regulated activity. Only issuers who meet all requirements may use the label, and qualifying stablecoins must be issued solely from Singapore.

This framework only applies to single-currency stablecoins (SCS) pegged to the Singapore dollar or a G10 currency. Algorithmic and other asset-backed stablecoins are regulated by general Digital Payment Token rules.

Key licensing requirements for stablecoin issuers in Singapore depend on the type of entity.

• Non-banks issuing more than S$5 million in SCS must obtain a Major Payment Institution (MPI) license.
• Banks are exempt from licensing, but must follow all substantive rules.

Requirements for Stablecoin Issuance Services in Singapore

• Reserves: Must be backed 100% by cash, cash equivalents, or short-term sovereign debt in the same currency, segregated from issuer assets, held with MAS-approved custodians, and attested monthly.
• Capital: At least 1 million SGD or 50% of annual operating expenses, plus liquid assets for orderly wind-down.
• Redemption: Stablecoins must be redeemable at par within five business days.
• Disclosures: Issuers must publish a white paper with details on stabilization, holder rights, and audit results.
• Restrictions: SCS issuers cannot engage in lending, staking, or other potentially risky activities.

UAE Stablecoin Regulation

The UAE regulates virtual assets through three separate jurisdictions: onshore Dubai, the Dubai International Financial Centre (DIFC), and the Abu Dhabi Global Market (ADGM). Each has its own regulator, and choosing jurisdiction is a key decision for issuers.

Dubai (Onshore)

Stablecoins in onshore Dubai are regulated by the Virtual Assets Regulatory Authority (VARA) as “Fiat-Referenced Virtual Assets” (FRVAs).

This framework creates certain obligations for stablecoin issuers.

• Issuers must obtain a VARA license.
• Licensed issuers must follow rulebooks on operations, compliance, risk management, technology, and market conduct.
• Stablecoin issuers must comply with rules on maintaining reserves, ensuring redemption rights for holders, and providing detailed disclosures in a white paper..
• Stablecoins pegged to the UAE Dirham (AED) are regulated only by the Central Bank of the UAE (CBUAE).

Dubai International Financial Centre (DIFC)

The Dubai Financial Services Authority (DFSA) does not regulate stablecoin issuance directly, but it sets the rules for recognized “Fiat Crypto Tokens.” Only tokens that have been formally recognized by the DFSA can be used by licensed firms providing financial services (like exchange or custody) within the DIFC region.

Issuers must demonstrate that such a token is fully backed by high-quality, liquid reserve assets and has a history of maintaining a stable price. This model is ideal for service providers who want to use established, pre-vetted stablecoins.

Abu Dhabi Global Market (ADGM)

Stablecoin issuance in the ADGM zone is regulated by the Financial Services Regulatory Authority (FSRA) as a “money service.” As such, issuers must obtain a money services license.

The framework is conservative, permitting only fully 1:1 fiat-backed tokens. Algorithmic stablecoins are explicitly banned.

Hong Kong Stablecoin Regulation

Hong Kong regulates stablecoins under the Stablecoins Ordinance of 2025, which establishes a licensing regime for issuing fiat-referenced stablecoins (FRS).

The Hong Kong Monetary Authority (HKMA) is responsible for granting licenses and overseeing compliance with the Stablecoins Ordinance.

Requirements for Stablecoin Issuers in Hong Kong

• Minimum capital: An issuer must have a minimum paid-up share capital of at least HKD 25 million or its equivalent in another currency.   
• Full reserve backing: Stablecoins must be fully backed at all times by a reserve of high-quality and highly liquid assets.   
• Segregated custody: Reserve assets must be kept legally and operationally separate from the issuer's own operational funds to protect holders in case of insolvency.   

To facilitate a smooth transition to the new regime, the HKMA launched a regulatory sandbox. This program enables potential applicants to share their business plans, receive regulatory feedback, and prepare for full compliance before the licensing regime comes into effect.

Conclusion

Global regulators are tightening oversight of stablecoins, led by the FSB and BIS, with the principle of “same activity, same risk, same rules.” Global stablecoins face the most scrutiny, and across all jurisdictions, 1:1 reserve backing, segregated custody, and clear redemption rights are mandatory.

National policies also reflect monetary sovereignty. The U.S. GENIUS Act reinforces US dollar dominance, the EU’s MiCA safeguards the euro, and Singapore creates a premium “walled garden” framework. Capital thresholds and strict AML/CFT compliance are universal, meaning only well-prepared issuers can operate at scale.

Jurisdictional choice shapes strategy. The U.S. offers scale and dollar primacy, the EU provides passporting but caps non-euro tokens, Singapore prioritizes credibility over size, the UAE splits oversight across multiple zones, and Hong Kong offers a transitional sandbox entry with high capital requirements.