Stablecoins and Their Regulation Across Different Countries

In the EU, stablecoin regulation is governed by the Markets in Crypto-Assets Regulation (MiCA). More information about our services within the MiCA framework can be found here. This regulation establishes unified rules for cryptocurrencies, including stablecoins. MiCA divides stablecoins into two categories:

1. Asset-referenced tokens (ARTs) – Tokens whose value is linked to a basket of assets such as fiat currencies, precious metals, or other crypto assets.
2. E-money tokens (EMTs) – Tokens backed by a single fiat currency, similar to electronic money. Further details can be found via the link.

The primary requirements for stablecoin issuers in the EU include:

• Mandatory registration and licensing for issuers of ARTs and EMTs.
• Issuers must maintain fully backed reserves, which should be stored in secure financial institutions.
• Transparency and regular audits of the reserves are required.
• Interest payments on EMTs are prohibited to avoid competition with bank deposits.
• Issuers must ensure that tokens can be redeemed for fiat currency.

For systemically important stablecoins that are widely used in payments, additional capital and risk management requirements may be applied.

In Singapore, stablecoin regulation is overseen by the Monetary Authority of Singapore (MAS). The key requirements for issuers are as follows:

• Stablecoin reserves must be held in low-risk, highly liquid assets.
• Issuers are required to ensure that stablecoins can be redeemed at their nominal value.
• Disclosure requirements include providing the results of reserve audits.

MAS regulates only single-currency stablecoins pegged to the Singapore dollar or currencies of G10 countries, and it requires cryptocurrency exchange operators to obtain a license to legally operate.

El Salvador is actively integrating cryptocurrencies into its economy. In 2021, it passed the Bitcoin Law, which recognized Bitcoin as legal tender, and in 2023, it introduced the Digital Assets Issuance Law, which regulates the issuance of stablecoins. Key aspects include:

• The requirement for stablecoin issuers to obtain licenses from the National Digital Assets Commission (CNAD).
• Tax incentives for crypto investors and businesses.

El Salvador is fostering the development of the stablecoin market by creating conditions for their safe use amidst economic instability and inflation.

In the United States, stablecoin regulation is still in development, and there is no unified federal law addressing all aspects of their use. However, various regulatory bodies, such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Reserve, have begun to craft approaches to regulate stablecoins to ensure financial market security and investor protection.

Offshore zones offer several benefits for stablecoin issuers:

1. Minimal or no regulation: These jurisdictions often lack stringent reserve requirements or stablecoin registration rules, enabling faster market entry.
2. Flexibility and low taxes: Many cryptocurrency startups find offshore zones appealing due to low tax rates and flexibility in establishing business processes.
3. Privacy: Many offshore jurisdictions provide high levels of privacy for company owners, attracting those seeking minimal regulatory intervention.