Stablecoin regulation: global principles

Stablecoins promise a stable value and fast settlement, which makes them useful for payments and trading but also exposes them to runs, like a bank or a money-market fund. International standard setters therefore treat them separately from other crypto-assets. Their principles explain why national stablecoin laws look so alike, and where they still differ.

Why stablecoins get their own rules

A fiat-backed stablecoin is a promise: one token can be exchanged for one unit of currency. If holders doubt that promise, they redeem or sell at the same time, and the issuer may have to sell reserve assets at a loss. The collapse of the algorithmic stablecoin TerraUSD in May 2022 and the brief depeg of USDC in March 2023, when part of its reserves sat at the failed Silicon Valley Bank, showed both failure modes. How mint, redemption and depegs work is covered in the lesson Stablecoins in market plumbing.

Four international bodies look at stablecoins from different angles:

• the FSB, for financial stability and comprehensive regulation;
• CPMI and IOSCO, for stablecoin arrangements that act as payment infrastructure;
• the Basel Committee (BCBS), for banks that hold, issue or back stablecoins;
• FATF, for anti-money-laundering controls.

The FSB high-level recommendations

In July 2023 the FSB published ten High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements, alongside its recommendations for crypto-assets in general. A global stablecoin is one with potential reach and use across several jurisdictions. The recommendations cover:

Recommendation 9 is the core. It asks for a robust legal claim for all holders against the issuer or the reserve assets, timely redemption without undue cost and, for coins referenced to a single fiat currency, redemption at par into fiat. The reserve must be at least equal to the coins in circulation at all times, made up only of conservative, high-quality and highly liquid assets, unencumbered, and segregated from the assets of the issuer, its group and the custodian. A stablecoin must not derive its value from algorithms: the FSB states that so-called algorithmic stablecoins do not meet Recommendation 9.

On 16 October 2025 the FSB published a thematic peer review of implementation. It found that few of the jurisdictions reviewed had finalized frameworks for global stablecoins, and that even those were not fully aligned with the recommendations. The main gaps were liquidity risk management, capital buffers, stress testing, redemption, reserve custody and eligibility, and recovery and resolution. The review also flagged stablecoins that operate across borders: differences in redemption, custody, disclosure and reserve rules between countries create room for arbitrage and make cross-border crises harder to manage.

CPMI-IOSCO: stablecoins as payment infrastructure

In July 2022 the Committee on Payments and Market Infrastructures (CPMI) and IOSCO published guidance on applying the Principles for Financial Market Infrastructures (PFMI) to stablecoin arrangements. It applies to arrangements that perform a transfer function and that authorities judge to be systemically important. Such an arrangement should observe all relevant PFMI principles as a whole, like a payment system. The guidance clarifies four areas:

• governance: clear and direct lines of responsibility and accountability, including over automated or decentralized parts of the arrangement;
• comprehensive risk management across the issuer, reserve manager, transfer mechanism and wallets;
• settlement finality: a clear moment when a transfer is final in law and in operation;
• money settlement: the stablecoin used as a settlement asset should carry little or no credit and liquidity risk.

The Basel Committee view

The BCBS cryptoasset standard, covered in the lesson Prudential treatment and building a compliance map, decides how much capital a bank holds against a stablecoin. Only a stablecoin that passes a redemption risk test (reserves at least equal to the coins outstanding at all times, made up of low-risk, high-quality assets) and whose issuer is supervised and subject to prudential capital and liquidity rules can enter Group 1b, where capital follows the reserve assets. The July 2024 amendments tightened the 1b criteria, for example on which reserve assets count and the due diligence a bank must perform on the stabilization mechanism. Stablecoins that fail the tests, including algorithmic ones, fall into Group 2 with far higher capital charges.

Requirements that recur in national regimes

National laws translate these principles into concrete rules. For example, the EU's MiCA regulation and the US GENIUS Act both require issuers to hold high-quality reserves at least equal to the coins outstanding, give holders a right to redeem at par and bar issuers from paying interest to holders.

The reserve rules are where details matter most. A coin backed 102% by assets looks safe until one learns that part of the reserve is long-dated bonds pledged as collateral elsewhere: that reserve is neither highly liquid nor unencumbered.

FATF adds the financial crime layer. Its targeted report of March 2026 on stablecoins and unhosted wallets urged issuers to be able to freeze, burn or withdraw tokens in the secondary market, using deny-lists and similar smart-contract controls.

Interest and yield: a recurring policy choice

The FSB recommendations do not address interest. Many national regimes nevertheless forbid issuers from paying interest or other returns to holders. The reasons are to keep stablecoins a means of payment rather than an investment product, and to limit the flight of deposits from banks into tokens. The policy debate has since moved to intermediaries: whether exchanges or wallet providers may pass on "rewards" funded by the issuer's reserve income. When reviewing a product, check who pays the yield, from what source, and whether the local rule reaches only the issuer or also its distributors.

Algorithmic and crypto-collateralized designs

Algorithmic stablecoins try to hold the peg by minting and burning a companion token rather than holding reserves. They do not meet FSB Recommendation 9, cannot reach Basel Group 1b and are excluded or banned outright in a number of regimes. Crypto-collateralized coins, backed by over-collateralized crypto-assets in smart contracts, usually fall outside the definition of a regulated fiat-backed stablecoin as well, and are treated as ordinary crypto-assets. For a compliance team the practical question is the same in every country: does the coin offer a legal claim to redemption at par, backed by segregated, high-quality reserves?

Exam focus: why stablecoins are regulated separately (run risk, UST and the USDC depeg); the FSB's ten high-level recommendations of July 2023 and the content of Recommendation 9 (legal claim, timely redemption at par, reserves at least equal to outstanding coins, high-quality, liquid, unencumbered, segregated, no algorithmic stabilization); the main implementation gaps found by the FSB's peer review; the scope of CPMI-IOSCO's July 2022 PFMI guidance (transfer function, systemic importance) and its four focus areas; the Basel Group 1b conditions; the common requirements of national regimes; the interest ban as a recurring choice and the debate on intermediary yield; FATF's freezing expectations.