Stablecoins—cryptocurrencies designed to hold a stable value relative to a specific currency or asset, such as the euro or US dollar—are becoming more accepted, regulated, and talked about across the globe. At just over 10 years old, these cryptocurrencies have finally found their product-market fit and are now being embraced by businesses in the crypto realm and in traditional sectors; Paypal has issued a stablecoin and Stripe has acquired a stablecoin platform.
This guide covers all the legal aspects of stablecoins, and is designed to help stablecoin projects navigate the various stablecoin laws that are emerging and adapting around the world. We’ll look at laws in the US, South America, the UK, the EU, the Middle East, and across the Asia-Pacific region. We’ll look at which stablecoins are thriving, where this is happening, and why, and we’ll also look at why some stablecoins are being delisted.
What is a stablecoin and what are the types of stablecoins?
On January 3, 2009, Bitcoin started trading, marking the birth of cryptocurrencies as a new type of asset. Then, on July 21, 2014, crypto-backed BitUSD was issued on the BitShares blockchain; the world’s first stablecoin went live. Over the last 10 years, more than 150 stablecoins have been launched and in 2025, even more are expected.
Like other cryptocurrencies, stablecoins are a type of digital assets that can be used to make cross-border payments or buy and sell crypto assets. As their value is tied to other, more stable, assets, they tend to be less volatile (other crypto assets aren’t backed by stable assets, so tend to be more volatile).
There are three types of stablecoin:
- Fiat-backed (centralized, collateralized)
- Crypto-backed (centralized, over-collateralized)
- Algorithmic (decentralized, under-collateralized)
Let’s take a closer look at these categories.
Fiat-backed stablecoins
These reflect the value of traditional currencies and are the most popular type of stablecoin. Issuers of a stablecoin claim to maintain a reserve of liquid assets (cash or cash equivalents) that match or exceed—and therefore back—the stablecoin’s value on the blockchain. These stablecoins are centralized and are commonly used for lending and borrowing activities, trading, and remittances within the DeFi sector. Fiat-backed stablecoins aren’t completely risk free: their reserves may include volatile or high-risk assets and there are no third-party auditing processes in place.
Examples include Tether (USDT) and Circle’s USDC. Tether is an Ethereum token and USDC is a digital dollar. Both are pegged to the value of the US dollar and US dollar equivalents.
Crypto-backed stablecoins and algorithmic stablecoins
Both crypto-backed and algorithmic stablecoins operate without traditional fiat backing, instead relying on cryptocurrency assets and smart contracts to maintain stability. These two types are closely related, with crypto-backed stablecoins requiring over-collateralization (typically 200% or more) while algorithmic ones use dynamic token supply adjustments. Both approaches aim to maintain price stability through code-governed mechanisms, though they carry similar risks: severe market fluctuations can trigger depegging events or system collapses. The main appeal of these systems is their decentralized, trustless nature, as they operate entirely through auditable smart contracts rather than centralized oversight. However, this same feature makes them potentially more volatile than their fiat-backed counterparts.
One of the more successful examples is MakerDAO’s Dai. A decentralized stablecoin running on Ethereum, DAI attempts to maintain a value of one US dollar and is backed by collateral on the Maker platform.
Are commodity-backed coins stablecoins?
While some industry commentators classify commodity-backed tokens as stablecoins, we do not think this definition is accurate. This is because commodities are not stable, so, as a result, commodity-backed tokens are not stable either.
📚 Learn more about other token types and their legal status.
What is a stablecoin depegging event?
Every stablecoin has a pegged value, typically a specific asset or assets, as explored above. When a stablecoin deviates from its peg—due to market turbulence, lack of liquidity, regulatory issues or technological issues—traders and investors react by buying or selling the stablecoin. This can create arbitrage opportunities, whereby the trader might try to sell the stablecoin and purchase the underlying asset if the stablecoin’s value is now higher than its peg. Sometimes the issuer can take action by changing the collateralization ratio or the stabelcoins supply, causing the stablecoin to stabilize and return to its peg.
However, for algorithmic stablecoins, these depegging events can be a lot more violent. In May 2022, TerraUSD experienced a depegging event that resulted in a huge sell-off and drop in the price of Terra (LUNA), the governance token of the Terra blockchain system. In just a few days, more than $40 billion of investor wealth disappeared. The infamous Terra-Luna collapse was thought by many to prompt the end of algorithmic stablecoins entirely.
What’s the global regulatory outlook for stablecoins?
2025 is now pipped to be the year of the stablecoin as it’s expected that enterprises will increasingly accept stablecoins as payments. Additionally, existing market players are pushing for expansion of their own stablecoins uptake, focusing on jurisdictions around the globe. Ripple’s RLUSD announced its availability on global exchanges in December 2024. Circle’s USDC now has a euro-backed EURC sister stablecoin, and the company has its sights set on the Middle East where Tether’s USDT has already been accepted as a virtual asset on the Abu Dhabi Global Market.
However, as some stablecoins take off, others are being delisted, most notably in the wake of the new Markets in Crypto-Assets Regulations (MiCA) in the EU. Several non-compliant stablecoins have been delisted by Coinbase, Kraken and Crypto.com, and we will look at the reasons for this below.
Stablecoin regulation in US
President Donald Trump’s pro-crypto stance means that the stablecoin regulations under consideration by the government are being labelled as a top priority. The Guiding and Establishing National Innovation for U.S. Stablecoins (“GENIUS”) Act was introduced on February 4, 2025 and aims to establish a federal licensing and supervisory framework for stablecoin issuers and payment stablecoins. That same day, “crypto czar” David Sacks, the White House AI and Crypto Advisor stated that the two key legislative efforts are the GENIUS Act and a regulatory framework for market structure.
It’s important to note that two days after the GENIUS bill was introduced, the STABLE act was also presented. The acts are largely the same however there are slight differences which could have profound effects if either or both acts are adopted.
Although not finalised or enforced yet, the GENIUS bill currently sets out the following key points that are very similar in the STABLE bill. Both bills define “payment stablecoin” as a digital asset that maintains a fixed value through backing by fiat currency and other secure reserves. They also state that payment stablecoins can only be issued by a permitted issuer and allow the choice of following a federal regime and or a state-regulated regime (so long as it is substantially similar to the federal one). Federal banking agencies will have enforcement authority over permitted payment stablecoin issuers. Most notably, the bill prevents the SEC, federal banking agencies, and the National Credit Union Administration (NCUA) from classifying or requiring an entity to classify payment stablecoins as securities. This should ensure that stablecoins are treated as payments instruments and not as investment products.
Both bills must be passed by both chambers and signed by the President before coming into law.
How do stablecoins become regulated in the US at the moment?
While the United States is still developing its specific stablecoin regulation, there are US dollar-pegged stablecoins that are already regulated and operational in the country, with the most prominent example being Circle's USDC. Circle, the issuer of USDC, is registered as a money services business with the Financial Crimes Enforcement Network (FinCEN) and holds money transmitter licenses in 46 states. USDC was first launched in September 2018 by Centre, a consortium formed through a joint venture between Circle and Coinbase. Since its inception, USDC has become one of the most widely used stablecoins globally, with Circle maintaining regulatory compliance and transparency throughout its operations. It’s thought that should the GENIUS or STABLE bill pass through congress, many more stablecoin issuers will look to the US for stablecoin opportunities.
Stablecoin regulation in UK
Compared to the US, the UK’s regulation is still sluggish and vague. The Bank of England’s explainer on stablecoins was last updated in November 2023, with a joint paper with the Financial Conduct Authority (FCA) published in October 2023. In November 2024, the FCA published research on UK consumer crypto views, along with a crypto roadmap. The 2025 schedule looks tightly packed with a lot of rules to be drafted and plans for a regime to go live are not pinned to any specific date. Ambitious plans with vague deadlines are not likely to instill confidence in crpyto investors and businesses.
Stablecoin in EU
The Market in Crypto-Assets Regulation (MiCA), which came into partial effect in June 2024, covers rules for stablecoins. The legislation was the first in Europe to introduce uniform market rules for crypto assets across the EU and we covered the key aspects of MiCA in our overview here. For stablecoins, algorithmic stablecoins are effectively banned as MiCA doesn’t view them as asset-referenced tokens. Any fiat-backed tokens must have a liquid reserve of a 1:1 ration to help preserve monetary sovereignty and protect financial market stability. Any business planning to issue EMTs (electronic or e-money tokens) and ARTs (asset-referenced tokens) must obtain authorization from the issuer themselves. Although MiCA doesn’t explicitly refer to stablecoins, ART and EMTs are considered as stabelcoins and are subject to enhanced regulatory policy and oversight.
Delisted stablecoins in the EU
Unsurprisingly, the enforcement of MiCA has prompted several exchanges to delist any non-compliant stablecoins. This includes Kraken which is delisting Tether (USDT), PayPal USD (PYUSD), Euro Tether (EURT), TrueUSD (TUSD), and TerraClassicUSD (UST) by March 31, 2025. Crypto.com is delisting ten tokens, including USDT, Wrapped Bitcoin (WBTC), Crypto.com Staked ETH (CDCETH), and Crypto.com Staked SOL (CDCSOL). Coinbase has also removed six stablecoins, such as Paxos Standard (PAX), PYUSD, and Gemini Dollar (GUSD).
These actions are being taken as these stablecoins may not have the proper authorization or may simply not have sufficient liquid reserves to meet MiCAs compliance requirements. Beyond March 31, non-compliant assets may be automatically converted to alternatives where applicable and there may be more serious consequences for responsible parties that have not taken action to comply or remove non-compliant assets.
It’s worth noting that some businesses are finding creative ways to withdraw non-compliant tokens from the EU market and still retain a foothold. For example, Tether, owner of Euro Tether (EURT) that is being pulled by Kraken, has decided to shut down its EURT stablecoin altogether. The decision was made in November 2024 and Tether focused on finding a stablecoin project already established in the EU and compliant with MiCA. In December 2024, Tether announced it has invested in EU-based stablecoin company StablR. Should this move prove successful, then other companies may follow suit in seeking out smaller issues compliant with MiCA.
Stablecoin regulation in the Middle East
The Abu Dhabi Global Market (ADGM) introduced laws on crypto several years ago, however only recently were rules amended to permit stablecoin issuance. The Central Bank of the United Arab Emirates (CBUAE) approved fiat-referenced tokens (FRT) in June 2024 along with regulation for overseeing and licensing stablecoins backed by the local currency, the dirham. Specifically, stablecoins are only permitted where “price stability is maintained by the issuer holding the same fiat currency it purports to be tokenising on a fully backed 1:1 basis.” Algorithmic stablecoins are therefore not permitted. The first ever dirham-pegged stablecoin to be approved in the UAE’s digital financial ecosystem was AE Coin, launched by AED Stablecoin LLC, in January 2025. Prior to that, in December 2024, Tether announced that the ADGM had accepted its USDT stablecoin, enhancing opportunities for licensed entities in the ADGM.
In 2024, the Dubai Financial Services Authority (DFSA) also introduced additional criteria for recognizing stablecoins. The DFSA oversees entities registered in the Dubai International Financial Centre (DIFC), another special economic zone. The amendments were designed to address overly-stringent rules that meant that only five crypto tokens were recognised by the DFSA initially. The DFSA views stablecoins as Fiat Crypto Tokens, with stablecoins pegged to multiple currencies categorised as Crypto Tokens. As of September 2024, the DFSA doesn’t regulate Fiat Crypto Tokens, but is allowed to recognise (following receipt of an application) Fiat Crypto Tokens issued in other jurisdictions.
Stablecoin regulations in the Asia-Pacific region
In Australia, stablecoins may be regulated under a mix of non-specific regulations, applicable depending on the characteristics of the individual stablecoin. As a result, development and use of stablecoins has been limited, with only a few examples of Australian dollar-linked stablecoins AUDRamp and TrueAUD.
In China, the regulatory environment towards stablecoins is quite tough: activities connected to virtual and cryptocurrencies are subject to strict regulation and scrutiny. As a result, not many stablecoin projects have emerged from the jurisdiction.
In Hong Kong there are no laws currently in place for stablecoins or cryptocurrencies generally; however, the territory’s own currency, the Hong Kong dollar, is pegged to the US dollar, meaning that its Digital HKD is effectively a stablecoin. Furthermore, the jurisdiction is seeking to regulate in the near future. Any projects wishing to launch a stablecoin in Hong Kong would have to navigate an extensive checklist of possible applicable laws, depending on the nature of the stablecoin itself. In short, Hong Kong does not currently provide an attractive location for stablecoins, yet.
In Singapore, for a few years stablecoins were either subject to the Securities and Futures Act, if the offer or issuance constituted a capital market product, or subject to the Payment Services Act 2019 if the token was viewed as either e-money or a digital payment token. This was cleared up by the Monetary Authority of Singapore (MAS) introducing a new stablecoin framework in August 2023.
The Monetary Authority of Singapore (MAS) has categorized stablecoins into three types:
- SGD/G10-Pegged stablecoins, which are pegged to the Singapore dollar or any of the G10 currencies. Issuers with over S $5 million in circulation must be licensed as Major Payment Institutions for both Digital Payment Token (DPT) service and Stablecoin Issuance Service.
- SGD/G10-Pegged stablecoins with less than S $5 million in circulation must get a DPT license and may opt for the Stablecoin Issuance Service.
- Issuers of any other stablecoin types must obtain a DPT license.
Importantly, all SGD and G10-pegged stablecoin issuing entities licensed for the Stablecoin Issuance Service are designated as “MAS-regulated stablecoins” and as such they must be issued exclusively in Singapore by either non-bank entities or banks. This explains why companies like Circle, which has it’s US-pegged stablecoin, USDC, had to open up their own local branch in Singapore before they could receive regulatory approval to begin circulating the token.
Stablecoin regulations in Latin America
In July 2024, the National Commission of Digital Assets (CNAD) announced the issuance of the El Salvador’s first-ever registered, regulated, and supervised stablecoin. The stablecoin, named Alloy by Tether (aUSDT) was issued by companies who were registered as stablecoin issuers. aUSDT is pegged to the US dollar and backed by the value of gold. In January 2025, Tether announced it plans to relocate its headquarters to El Salvador, bringing the country and company even closer, and promoting El Salvador as a growing crypto hub. El Salvador already has a strong pro-crypto stance, adopting BTC as legal tender back in 2021 and establishing a Bitcoin buying plan, which included the creation of their own reserve. With Tether being such a prominent and influential company, it’s likely that more firms will follow the company and we could see an increase in the number of stablecoin projects in the region too.
In Argentina, stablecoin use saw a marked uptake as the country grappled with huge inflation in 2024. In fact, it looks as if there is a direct link between the devaluation of the country’s currency and the increase in stablecoin use; people are using stablecoins to get exposure to US dollars. By early 2024, Argentina had emerged as a leading Latin American nation for both the purchase and holding of stablecoins. The country’s president is notably pro-crypto and has introduced a shift in the jurisdictions’ approach to digital currencies. It’s important to note that cryptocurrencies are not illegal and are not recognized as legal tender, meaning they operate in the no-man’s land of legal uncertainty, which could be risky for in-country stablecoin projects.
Case study: How Circle obtained a MiCA license for stablecoins
Stablecoins are typically classified into two main categories under MiCA: asset-backed tokens and e-money tokens. Circle, a prominent player in the stablecoin space, successfully obtained their license as an e-money token issuer in France. Their licensing journey provides valuable insights into the process.
The company's path to compliance involved two key requirements:
- Obtaining authorization as a credit institution or Electronic Money Institution (EMI)
- Publishing a MiCA-compliant whitepaper
Circle initiated this process on March 21, 2023, by submitting their application to French authorities. By May 31, 2024, they published their updated whitepaper, which now serves as a model for MiCA compliance. The company subsequently received their EMI license from the Autorité de Contrôle Prudentiel et de Résolution (ACPR), France's banking regulatory authority.
While Circle has announced their successful licensing, as of February 2025, their license details are yet to appear on either the French regulator's website or the European Banking Authority (EBA) registry. This documentation is expected to be publicly available soon.
Prepare for more stablecoin rule changes in 2025
As we've seen throughout this guide, regulated stablecoins are becoming increasingly important in 2025. With new regulations being implemented globally—from MiCA in the EU to emerging frameworks in the UAE and the US—the stablecoin landscape is rapidly evolving. This creates both challenges and opportunities for stablecoin projects looking to operate across different jurisdictions.
Legal Nodes can help you navigate this complex regulatory environment. Our team can:
- Assess your project and identify the most suitable licensing options for your needs
- Connect you with our network of local legal experts for efficient implementation
- Guide you through compliance requirements including licensing, AML/CFT, GDPR, and DORA compliance
Ready to launch your stablecoin project? Contact Legal Nodes today to get started with a comprehensive legal strategy tailored to your needs.
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