From the US to Japan, stablecoins are causing a global financial rewrite

Indian Express

6 days ago

Written by Sanhita Chauriha
When Facebook (now Meta) launched its ill-fated stablecoin project, Libra, in 2019, central banks dismissed it as a corporate fantasy. Fast-forward to 2025. The same monetary authorities are now crafting legal blueprints for what is shaping up to be the next great leap in financial infrastructure: The regulation and integration of stablecoins. These cryptoassets, pegged to fiat currencies and often backed by real-world reserves, are no longer just liquidity tools for crypto traders. They are becoming foundational rails for payments, settlement, and programmable money. But as stablecoins inch closer to mass adoption, governments across the world are grappling with a new policy trilemma: How to encourage innovation, maintain financial stability, and preserve monetary sovereignty.
The US, in a rare bipartisan feat, passed the GENIUS Act, a sweeping federal bill designed to regulate fiat-backed stablecoins. Under its provisions, stablecoins must be backed 1:1 by high-quality liquid assets (HQLA), be redeemable on demand, and be subject to monthly reserve disclosures and anti-money laundering checks. Issuers over $10 billion in circulation are now federally overseen, while smaller ones can operate under state charters, provided those states meet minimum national standards. In effect, the US is laying the groundwork for a tokenised digital dollar, while retaining oversight through traditional financial plumbing.
Critics argue the GENIUS Act is a Trojan horse for financial incumbents. The law requires issuers to either be licensed financial institutions or partner with one effectively handling regulatory advantage to major banks. Unsurprisingly, Bank of America's CEO Brian Moynihan recently announced the bank is ready to issue its own stablecoin, following moves by JPMorgan (JPM Coin) and PayPal (PYUSD). If this trend continues, Wall Street may soon displace the DeFi startups that once pioneered this space. Nonetheless, such institutional entry brings maturity, deeper liquidity, and integration with the broader economic traits necessary for stablecoins to scale beyond crypto-native applications.
Europe has taken a more technocratic path. The Markets in Crypto-Assets (MiCA) regulation, to be enforced from late 2024, classifies stablecoins as either 'e-money tokens' or 'asset-referenced tokens.' Stablecoin issuers must meet capital requirements, submit whitepapers, disclose reserve asset composition, and adhere to redemption guarantees. 'Significant' stablecoins that with large circulation or systemic reach will face direct oversight by the European Banking Authority and may be barred from excessive transaction volumes. MiCA aims to future-proof the euro's digital periphery while preventing stablecoins from competing directly with sovereign currency, a concern central banks share across continents.
The United Kingdom, post-Brexit, is scripting its own stablecoin strategy with a regulatory regime that will place fiat-backed stablecoins under the supervision of the Financial Conduct Authority (FCA) and the Bank of England. Interestingly, the UK proposes to exempt overseas issuers from full domestic compliance if their home jurisdictions maintain equivalent safeguards. This open-but-cautious model aims to position London as a magnet for global crypto-finance, without abandoning core prudential standards.
In Asia, innovation is swift but cautious. Singapore's Monetary Authority (MAS) has finalised a comprehensive regulatory framework for stablecoins pegged to the Singapore dollar or any G10 currency. Issuers must ensure full reserve backing, fast redemption (within five business days), and high transparency. Only those who meet the MAS's standards may market their coins as 'MAS-regulated', a label likely to become a global credibility mark. Meanwhile, Hong Kong has also passed stablecoin legislation, effective by 2025, limiting issuance to licensed financial institutions. Already, major fintech players like Ant Group are applying for licenses, eager to gain early-mover status in the city's evolving digital asset ecosystem.
Japan stands apart with perhaps the strictest regime: Only banks, fund-transfer firms, or trust companies can issue yen-pegged stablecoins. Amendments to the Payment Services Act in 2022 tightly regulate redemption, disclosure, and asset segregation, favouring stability over growth. While the market is small, Japan's emphasis on consumer protection and conservative financial norms reflects a broader regional wariness toward crypto's more volatile edges.
Meanwhile, the United Arab Emirates has emerged as the Gulf's most aggressive regulator of stablecoins. Its Virtual Assets Regulatory Authority (VARA) and the UAE central bank have mandated 1:1 reserve backing, monthly third-party audits, and strict anti-money laundering/combating the financing of terrorism (AML/CFT) protocols. Dubai, in particular, is branding itself as a digital finance hub. Its approach mirrors Singapore's in one key way: Credibility must be earned, not assumed.
What unites these regulatory initiatives despite differing geographies and philosophies is a growing consensus that stablecoins are no longer hypothetical. Their programmable nature makes them attractive for everything from cross-border settlements and tokenised trade finance to retail micropayments. The Bank for International Settlements, in its April 2024 paper, warned that more than 600 de-pegging events occurred in 2023, underscoring their fragility. Yet it also acknowledged that, with proper regulation, stablecoins could serve as complements to Central Bank Digital Currencies (CBDCs), not threats.
The stablecoin race is not merely a question of financial regulation. It is one of economic statecraft. The US sees it as a lever to maintain dollar dominance in a multipolar world. Europe views it as a way to secure financial autonomy in the age of digital platforms. Asia, meanwhile, seeks to modernise without destabilising. And the Gulf hopes to leapfrog into fintech relevance.
In short, stablecoins are forcing countries to rethink not just how money moves but who moves it, who regulates it, and to whom it ultimately belongs.
The writer is a technology lawyer. Views are personal