Stablecoins: Promise, Peril, and the Policy Race

What are stablecoins (and why they matter)

Stablecoins are crypto-tokens designed to keep a steady value, typically by referencing fiat money (e.g., USD, EUR) or baskets of assets. They aim to blend the instant, 24/7 settlement of blockchains with the familiarity of money. Benefits include low-cost cross-border transfers, programmability (escrow, conditional payouts), faster treasury flows, and access to dollar/euro liquidity in under-banked markets. Risks include run dynamics (if reserves are weak or illiquid), opacity around backing and governance, wallet-level illicit finance, and potential spillovers into short-term funding markets. Regulation therefore focuses on 1:1 reserves, redemption rights, disclosures, and AML/CFT controls. In the EU, stablecoins fall under MiCA as e-money tokens (EMTs) or asset-referenced tokens (ARTs); in the U.S., the new GENIUS Act creates a specific regime for “payment stablecoins.”

The regulatory centre of gravity 

United States — GENIUS Act (enacted July 2025)

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025 is the first comprehensive U.S. federal stablecoin law. It requires 1:1 reserves in specified high-quality assets, places nonbank issuers under OCC supervision (or state regimes deemed “substantially similar”), excludes permitted payment stablecoins from SEC/CFTC jurisdiction, bans interest/yield to holders, and gives stablecoin holders super-priority in insolvency. Foreign issuers can reach U.S. users only if their home regime is deemed comparable and they meet U.S. law-enforcement/AML obligations. The law takes effect the earlier of 18 months post-enactment or 120 days after final rules.

European Union — MiCA (in force; stablecoin rules live since June 30, 2024)

Under MiCA, EMT/ART issuers must publish white papers, maintain full liquid reserves, meet governance/capital standards, and honour redemption at par. “Significant” tokens face enhanced oversight (EBA/ESMA) and limits on scale/use if financial-stability risks arise. Transitional/grandfathering rules run through 2025–2026 for CASPs. National regulators (e.g., BaFin, AMF, CONSOB) have issued guidance and timelines.

Hong Kong — Stablecoins Ordinance (effective Aug 1, 2025)

Hong Kong’s new Stablecoins Ordinance creates a licensing regime for fiat-referenced stablecoin (FRS) issuers, with detailed supervision and AML/CFT guidelines. As of mid-August 2025, no issuers are yet licensed; the HKMA has posted explanatory notes and transitional guidance. A six-month transition applies for pre-existing operators.

Officials see the framework as a bridge for cross-border flows (including potential e-CNY interactions), but licenses will be phased and tightly scoped at launch.

United Kingdom — regime in flight (consultations in 2025)

The UK is bringing fiat-backed stablecoins into the perimeter via Crypto RAO changes under FSMA and FCA/BoE rulebooks. The FCA’s CP25/14 consults on rules for “qualifying stablecoins” and custody; the BoE will consult on systemic stablecoin systems. HM Treasury published the draft SI and policy note. Final rules will determine how UK-issued or marketed coins differ from e-money and how multi-currency/basket coins are treated.

The FCA frames qualifying stablecoins as money-like (not investment products), nudging them toward payments use cases, while the BoE is focused on system-level resilience. 

“Competing models” of stablecoin law can impact viability

GENIUS, MiCA and Hong Kong’s Stablecoin Ordinance all offer diverging models for regulating stablecoins. 

• GENIUS puts stablecoin issuance in the hands of banks and federally licensed entities.
• MiCA permits non-bank issuers under the supervision of the European Banking Authority.
• Hong Kong requires HKMA licensing and imposes strict requirements on who qualifies. 

These diverging laws mean that issuers must build parallel compliance structures for each jurisdiction. This includes separate legal entities, audits and governance models, adding cost and operational friction.

All these legal entities and reporting regimes are costly, and smaller stablecoin companies will find it harder to pay compliance costs, particularly if they operate across multiple regions. This could push smaller fish out of markets or force them to become part of an acquisition deal by larger firms. 

Which regulation will win out and what does it mean for the underlying currency?

If regulation is both needed and possible, it still leaves the question of which regulatory regime will serve as an example for further regulation and cooperation. 

According to experts in the space “GENIUS won’t override existing laws but will shape global standards through market weight.” The act’s supervision model, wherein the comptroller regulates non-bank stablecoin issuers, and existing regulators cover banks issuing stablecoins, is a template that other countries can repeat. 

GENIUS is likely to influence regulatory thinking through its structured approach to reserves, redemption rights and issuer accountability. In doing so, it will help to shape global expectations and inform cross-border compatibility decisions.

It is possible that major financial centres will reach a consensus on stablecoin regulations, but it is likely not to happen in the short term. In the meantime, smaller players are likely to be pushed out as stablecoin issuers consolidate in the face of new regulations. 

For the time being over 99% of the global stable coin capitalization is dollar-denominated with the total value of USD-pegged stablecoins exceeding US$230bn. As the CEO of Finery Markets stated in a recent interview, “Everyone can now freely use dollars in the digital world”. When asked what this means for the Euro and whether it risks being weakened, his reply was that “USD-pegged stablecoins acting as a digital extension of the US dollar pose a risk for any alternative means of payment, including the Euro. While these stablecoins do not create a monetary multiple like traditional fiat, their widespread adoption amplifies the dollar’s utility in the digital economy, especially for cross border transactions”.     

Wider developments to watch 

• UK — Momentum is building but industry warns the UK risks lagging peers if consultations don’t convert into permissions soon. Expect final rules to set custody liability, disclosure, and operational resilience, and a separate BoE regime for systemic arrangements.
• China (mainland) — Domestic crypto remains restricted, but policy discussions around offshore, yuan-pegged stablecoins in Hong Kong have intensified. Beijing weighs RMB internationalization gains vs. capital-flow control risks.
• South Korea — Phase one (VAUPA) took effect in July 2024 (user protections for VASPs). Policymakers are drafting a won-stablecoin bill for submission in October 2025, covering issuance, collateral, and internal controls (still at proposal stage as of August 2025).
• EU member states — Supervisors are operationalizing MiCA: Germany (BaFin guidance); France (AMF alignment); Italy (transition deadlines). Expect 2025–2026 to be the heavy-lift period for CASP authorizations.

What financial institutions are doing now

A report from enterprise-grade digital assets platform Fireblocks shows that 90% of institutional players are using or exploring the use of stablecoins in their operations.

The report, published May 15, surveyed 295 executives across traditional banks, financial institutions, fintech companies and payment gateways. Almost half of the respondents (49%) said they already use stablecoins in payments, while 23% are conducting pilot tests and another 18% are in the planning stage.

Only 10% of institutions surveyed said they were undecided about stablecoin adoption.

As traditional cross-border systems are hampered by higher costs, delays and other inefficiencies, stablecoins have emerged as a strategic solution in emerging markets’ business-to-business (B2B) settings. 

The report found that financial institutions, particularly traditional banks, cited cross-border payments as a top priority for using stablecoins. Banks use stablecoins for a competitive advantage, to reduce friction and meet customer expectations. 

The report found that 58% of traditional banks use stablecoins for cross-border payments, while 28% use the assets to accept payments. Twelve percent of banks use stablecoins to optimize their liquidity, while 9% use them in merchant settlements. Another 9% use them in B2B invoicing. 

Fireblocks said banks see stablecoins as a “path to modernization.” It said that since the assets are fiat-pegged, it’s easier to integrate them into existing treasury workflows. In addition, stablecoins offer a lever to reclaim market share from financial technology companies and reduce capital lock-up.

Activity to date:

• Circle — First global issuer to announce MiCA-compliant issuance of USDC and EURC via a French EMI, complete with notified white papers; enabled EU passporting and bank-grade disclosures.
• PayPal (PYUSD) — Expanded to Arbitrum in July 2025 and is pushing crypto payments/merchant features onchain. 
• Visa — Broadened stablecoin settlement to more USD coins, EURC, and additional blockchains (beyond Ethereum/Solana), signalling network-level integration of fiat-backed tokens.
• Mastercard — Joining Paxos’ Global Dollar Network; enabling multiple stablecoins (e.g., USDG, USDC, PYUSD, FIUSD) across Mastercard Move/Multi-Token Network; pilots for merchant acceptance.
• Société Générale-Forge — EURCV (euro) live; USDCV (USD) launched with BNY Mellon as reserve custodian; positioned as MiCA-compliant instruments for institutions (Ethereum/Solana).
• Monerium (EURe) — MiCA-aligned e-money token with >€4B processed; deepening compliance tooling with Elliptic.
• Stripe — Announced stablecoin accounts (initially USDC and Bridge’s USDB) for businesses to hold/send funds on fiat and crypto rails.

Together, these players are shaping the long-term foundation for stablecoins as a core utility in digital finance, not as standalone instruments, but as embedded components of a re-architected value network.

Activity in other sectors

The GENIUS Act gives U.S. issuers a federal path for payment stablecoins, prompting big merchants to experiment in the space. For high-volume merchants, a house stablecoin (or accepting existing ones) could trim interchange, speed settlement, and power rewards, but it’s a heavy lift on compliance, wallet UX, and on/off-ramps. 

Walmart, and Amazon are reportedly evaluating a coin for checkout and settlement efficiency. Expedia is also exploring the launch of a stablecoin, as it is already exposed to stablecoin spend through its association with Travala which lets travellers book Expedia inventory on Travala and pay with USDC/USDT and other crypto.

Takeaways for viability and go-to-market

• Regulatory clarity is finally here in the U.S. and EU. The GENIUS Act and MiCA converge on 1:1 reserves, par redemption, AML, and strict marketing—a boon for compliant issuers and institutions seeking settlement assets. Differences around interest bans, supervision, and foreign-issuer access can tilt where a project launches first.  
• Hong Kong is open—but carefully. The licensing door is open with a phased rollout; early licenses will be few, with scrutiny on governance and cross-border use.
• The UK is next. Policy direction is clear (money-like, payments focus), but commercial timelines depend on how quickly consultations crystallize into rulebooks.
• Asia competition is heating up. Mainland China weighs offshore RMB-stablecoins via Hong Kong to support RMB usage; Korea is moving toward a statutory framework for won-coins. Issuers should watch for FX controls and cross-border compliance frictions.

𝗪𝗵𝗮𝘁’𝘀 𝗻𝗲𝘅𝘁

Stablecoins are emerging from their experimental roots into a regulated and increasingly trusted part of the financial system. With frameworks now crystallizing in the U.S., EU, Hong Kong, and beyond, issuers and institutions now have the confidence to build at scale. By marrying the trust of fiat with the flexibility of blockchain, they have the potential to open global markets, reduce remittance costs, and enable programmable money for new generations of commerce. If regulators and innovators can keep pace together, stablecoins may become not just a bridge between traditional finance and digital markets, but one of the foundational rails of a more open, resilient, and inclusive global economy.

How we can assist

At Grant Thornton Cyprus, we support stablecoin issuers in meeting one of the most critical requirements of today’s regulatory and market landscape: independent verification of reserves. Our team has extensive experience preparing monthly reports under agreed-upon procedures, working with both fiat-backed and asset-backed (including gold) stablecoins. By providing transparent, reliable attestations of reserves against tokens in circulation, we help issuers strengthen trust with regulators, investors, and users alike. If you are exploring or scaling a stablecoin project, we welcome the opportunity to discuss how GTCy can assist you in meeting these obligations.