Meet Dr. Marcus Hartmann
Dr. Marcus Hartmann has spent over two decades at the intersection of financial law and emerging technology. Based in Zug — Switzerland's Crypto Valley — he has guided startups, trading platforms, and institutional investors through the full spectrum of VASP licensing: from FINMA FinTech notifications to MiCA CASP applications and offshore structuring across 60+ jurisdictions.
He joined CryptoLicenses.net as Senior Licensing Advisor after a decade leading the fintech practice of a Swiss-regulated law firm, where he managed regulatory mandates in the UAE, Singapore, Liechtenstein, and the Cayman Islands.
- EU MiCA classifies stablecoins into two categories: Asset-Referenced Tokens (ART) and E-Money Tokens (EMT), each with distinct requirements
- The US GENIUS Act (2025) created the first federal stablecoin framework, requiring federal licensing or state-level authorisation for issuers above a $10B threshold
- All major regimes now require banking-grade reserves: 100% liquid assets backing every stablecoin in circulation
- Algorithmic stablecoins — those that rely on algorithmic mechanisms rather than real-world assets to maintain their peg — are banned in the EU under MiCA
- Major issuers including Tether (USDT) and Circle (USDC) have restructured legal entities and reserve arrangements to comply with the emerging global standards
- Non-compliant stablecoin issuers face delistings from regulated exchanges and loss of access to banking infrastructure in key markets
What Are Stablecoins?
Stablecoins are cryptoassets designed to maintain a stable value relative to a reference asset — most commonly a fiat currency such as the US dollar, but also gold, a basket of currencies, or other commodities. Unlike Bitcoin or Ether, whose prices fluctuate freely, stablecoins aim to provide the efficiency and programmability of blockchain technology while avoiding price volatility.
As of 2026, the total stablecoin market capitalisation exceeds $200 billion. USDT (Tether) and USDC (Circle) together account for more than 85% of the market. Stablecoins are used for trading, cross-border payments, DeFi liquidity, remittances, and as a dollar-equivalent in markets with currency controls.
Regulators across the world have now concluded that stablecoins — particularly those with large circulation figures — pose systemic risks equivalent to those of commercial bank deposits or money market funds. This conclusion drives the banking-grade regulatory requirements that now apply in the EU, US, UK, and Asia-Pacific.
MiCA Stablecoin Rules — EU Framework
The EU Markets in Crypto-Assets Regulation (MiCA) entered into force in June 2023, with stablecoin provisions (Titles III and IV) applying from June 2024. MiCA creates the world's most comprehensive stablecoin regulatory framework, establishing two distinct categories with different requirements.
ART vs EMT: The Core Distinction
MiCA classifies stablecoins into two types based on their reference asset. Asset-Referenced Tokens (ART) reference a basket of assets — fiat currencies, commodities, or cryptoassets. They require authorisation from the EU member state where the issuer is incorporated. E-Money Tokens (EMT) reference a single fiat currency. They are treated as electronic money and require the issuer to hold an Electronic Money Institution (EMI) or credit institution licence.
Reserve Requirements Under MiCA
Both ART and EMT issuers must maintain a 1:1 reserve of liquid assets backing every token in circulation. For EMTs, reserves must be held in highly liquid, low-risk instruments — typically bank deposits and short-duration government bonds. Reserves must be segregated from the issuer's own assets, held with regulated credit institutions, and subject to regular independent audits. Redemption at par must be available to all holders at all times.
Issuance Cap for Significant Tokens
MiCA introduces a significant stablecoin designation for tokens that exceed €5 billion in market cap or €200 million average daily transactions. Significant ART issuers face enhanced capital requirements (3% of reserve assets), stricter liquidity management rules, and direct supervision by the European Banking Authority (EBA) rather than national regulators. The €200 million per day transaction cap applies per significant token — if breached, the issuer must suspend new issuance.
Whitepaper Requirement
Every stablecoin issuer in the EU must publish a detailed whitepaper approved by the competent national authority. The whitepaper must cover: the issuer's rights and obligations, the stabilisation mechanism, reserve management policy, redemption arrangements, risk factors, and governance structure. For significant tokens, the EBA may require additional disclosures. The whitepaper must be kept up to date and any material changes require regulatory notification.
Tether (USDT) and MiCA Compliance
Tether's USDT — the world's largest stablecoin — is not currently authorised as an EMT or ART under MiCA. In response, multiple regulated EU exchanges delisted USDT for EU customers in late 2024. Tether has not announced plans to seek EU authorisation. USDC (Circle) received EMT authorisation in France, making it the first major stablecoin to be MiCA-compliant for EU distribution.
MiCA timeline: Stablecoin rules (Titles III and IV) have applied since June 30, 2024. CASP rules for crypto service providers apply from December 30, 2024. Existing stablecoin issuers operating in the EU without authorisation risk enforcement action and mandatory delisting from regulated venues.
"Under MiCA, the key distinction that every stablecoin issuer must resolve is whether their token qualifies as an EMT or an ART. This is not a technical question — it is a legal characterisation with profound regulatory consequences. An EMT issuer needs an e-money institution authorisation. An ART issuer needs a white paper approved by an NCA and must comply with reserve, governance, and liquidity requirements that are far more demanding. Getting this classification wrong in the application stage is costly."
— Dr. Marcus Hartmann, Senior Licensing Advisor
US Regulation — GENIUS Act 2025
The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was signed into law in 2025, creating the first comprehensive federal stablecoin regulatory framework in the United States. Prior to the GENIUS Act, stablecoin issuers operated under a patchwork of state money transmitter licences with no federal stablecoin-specific framework.
What the GENIUS Act Requires
The GENIUS Act establishes a dual federal-state licensing pathway for stablecoin issuers. Issuers with more than $10 billion in stablecoin market capitalisation must obtain federal approval and be supervised by the Office of the Comptroller of the Currency (OCC). Smaller issuers may operate under state-level frameworks, provided those state regimes meet minimum federal standards set by the GENIUS Act.
Reserve Requirements
The GENIUS Act mandates that all payment stablecoin issuers maintain 100% reserves consisting only of: US coins and currency (physical cash), demand deposits at insured depository institutions, short-term US Treasury bills (maturity of 90 days or less), and overnight repurchase agreements secured by US Treasuries. Commercial paper, corporate bonds, money market funds, and other instruments are excluded from eligible reserves. This is a stricter standard than most existing issuer practices.
Federal vs State Path
Issuers under $10B in market cap may choose either federal OCC supervision or regulation under a qualifying state framework. States must enact GENIUS-compliant stablecoin laws or their issuers must move to the federal path. As of early 2026, several states including New York, Texas, and Wyoming have enacted or are advancing compliant stablecoin frameworks. New York's BitLicense regime is being amended to accommodate the GENIUS Act standards.
Prohibition on Algorithmic Stablecoins
The GENIUS Act prohibits the issuance of payment stablecoins that rely on algorithmic mechanisms to maintain their peg without full reserve backing. This provision directly responds to the TerraUST collapse of 2022. Issuers of purely algorithmic tokens face criminal penalties under the Act.
Existing issuers: Circle (USDC) and Paxos (PYUSD, BUSD) have restructured reserves and obtained or are seeking OCC non-objection letters under the GENIUS Act framework. Tether has announced it will not seek US federal licensing, effectively positioning USDT as a product for non-US markets.
UK Stablecoin Regime — FSMA 2023
The United Kingdom's approach to stablecoin regulation is built on the Financial Services and Markets Act 2023 (FSMA 2023), which gave HM Treasury and the Financial Conduct Authority (FCA) powers to regulate fiat-backed stablecoins used as a means of payment. The Bank of England additionally has oversight powers for systemically important stablecoin arrangements.
FCA Oversight
Under the FSMA 2023 framework, fiat-backed stablecoins used for payment in the UK require FCA authorisation. The FCA has published a consultation framework requiring stablecoin issuers to: maintain 1:1 liquid reserves, provide redemption on demand at par, disclose reserve composition, appoint an independent reserve auditor, and meet conduct-of-business standards similar to e-money issuers. The regime applies to both UK-incorporated issuers and overseas issuers actively marketing to UK consumers.
Systemic Stablecoin Designation
The Financial Market Infrastructure (FMI) sandbox and the FSMA 2023 framework allow HM Treasury to designate stablecoins used in systemic payment systems for direct Bank of England oversight. A stablecoin achieving sufficient scale in UK retail payments — analogous to a major card scheme — would trigger Bank of England supervision equivalent to that applied to payment system operators. No stablecoin has yet reached this threshold in the UK, but the framework is in place for when one does.
Post-Brexit Divergence from MiCA
The UK has explicitly chosen not to mirror MiCA. The UK regime is more narrowly focused on payment stablecoins, does not adopt the ART/EMT classification, and places greater emphasis on systemic risk rather than retail investor protection. This divergence creates a dual compliance burden for issuers seeking both EU and UK authorisation, as the two regimes have different reserve eligibility rules, disclosure requirements, and governance standards.
Global Stablecoin Regulation — Jurisdiction Overview
The following table summarises the regulatory status and key requirements for stablecoin issuers across major jurisdictions as of 2026. All major financial centres now have either enacted or advanced stablecoin-specific legislation.
| Jurisdiction | Framework | Status (2026) | Key Requirement | Regulator |
|---|---|---|---|---|
| 🇪🇺 European Union | MiCA (ART/EMT) | In force (Jun 2024) | EMI or credit institution licence; 1:1 reserves | EBA / National CAs |
| 🇺🇸 United States | GENIUS Act 2025 | In force (2025) | OCC federal licence (>$10B) or state approval | OCC / State regulators |
| 🇬🇧 United Kingdom | FSMA 2023 | In force | FCA authorisation for payment stablecoins | FCA / Bank of England |
| 🇸🇬 Singapore | Payment Services Act (amended) | In force (Aug 2023) | MAS licence; 1:1 reserves in SGD/USD instruments | Monetary Authority of Singapore |
| 🇯🇵 Japan | Payment Services Act (amended 2023) | In force | Trust bank or licensed issuer structure; full reserve | Financial Services Agency (FSA) |
| 🇦🇪 UAE | CBUAE Payment Token Services Regulation | In force (2024) | CBUAE licence; AED-backed or foreign-backed tiers | Central Bank of UAE |
| 🇭🇰 Hong Kong | Stablecoin Ordinance (HKMA) | Sandbox / full regime 2025 | HKMA licence; HKD/major currency backing; full reserves | Hong Kong Monetary Authority |
Not sure which licence fits your business? Get a free 30-minute consultation with our advisors. We'll review your model and recommend the right jurisdiction.
Get Free Consultation →Reserve Requirements — Jurisdiction Comparison
Reserve requirements are the central pillar of stablecoin regulation worldwide. Every major regime requires that each stablecoin be backed by liquid assets of equivalent or greater value. However, the specific eligible assets, custody requirements, and audit obligations differ significantly across jurisdictions.
| Jurisdiction | Required Backing | Eligible Assets | Audit Requirement | Custody Rule |
|---|---|---|---|---|
| 🇪🇺 EU (MiCA EMT) | 100% | Bank deposits, short-term gov bonds | Annual independent audit + monthly disclosure | Segregated; regulated EU credit institution |
| 🇺🇸 US (GENIUS Act) | 100% | Cash, T-bills (<90 days), overnight repos | Monthly attestation + annual audit | Insured depository institution or approved custodian |
| 🇬🇧 UK (FCA) | 100% | Bank deposits, gov bonds, central bank reserves | Regular attestation; independent auditor | UK-regulated firm; asset segregation required |
| 🇸🇬 Singapore (MAS) | 100% | Cash, bank deposits, short-term gov securities | Monthly audit; annual independent review | Trust structure; MAS-approved custodian |
| 🇯🇵 Japan (FSA) | 100% | Bank deposits (domestic); gov bonds permitted | Annual FSA examination | Trust bank structure required |
| 🇦🇪 UAE (CBUAE) | 100% | AED/USD cash, central bank deposits, gov bonds | Quarterly attestation | CBUAE-approved bank or custodian |
| 🇭🇰 Hong Kong (HKMA) | 100% | HKD/major currency cash, gov securities | Monthly disclosure; annual audit | HKMA-approved custodian; local substance required |
Tether's reserves under scrutiny: Tether's reserve composition — which historically included commercial paper, secured loans, and non-traditional instruments — does not meet the strict criteria of the EU GENIUS Act or MiCA frameworks. Tether has shifted its reserves heavily toward US T-bills since 2023, but the issuer remains unlicensed in any major regulated jurisdiction as of 2026.
Algorithmic Stablecoins — After the Terra Collapse
The collapse of TerraUST (UST) and its sister token LUNA in May 2022 wiped out approximately $40 billion in value within days and triggered a cascading crisis across crypto markets. The collapse remains the most consequential event in the history of stablecoin regulation, directly precipitating bans and restrictions on algorithmic stablecoins in every major jurisdiction.
How Terra Collapsed
TerraUST maintained its $1 peg through an algorithmic relationship with LUNA: when UST fell below $1, users could burn UST to mint LUNA, theoretically restoring the peg. The mechanism relied entirely on confidence and arbitrage incentives rather than held reserves. When large-scale redemptions began in May 2022, the system entered a "death spiral" — UST fell, LUNA was minted at an accelerating rate, hyperinflation of LUNA destroyed confidence further, and the entire system collapsed in approximately 72 hours. No reserve assets existed to honour redemptions.
MiCA's Algorithmic Stablecoin Ban
Article 23 of MiCA explicitly prohibits the issuance of any token that references another crypto-asset or a basket of crypto-assets to maintain its peg through purely algorithmic means, without full reserve backing. The prohibition targets the exact mechanism that caused the Terra collapse. Any token meeting this definition cannot be legally issued or publicly offered in the EU, regardless of market cap.
What Counts as Algorithmic
The MiCA definition is broad. A token is algorithmic if it maintains its reference price primarily through: supply adjustments managed by smart contracts, rebasing mechanisms, seigniorage share designs, or any scheme where the "reserve" consists primarily of another token issued by the same issuer. A token that holds real-world assets (even crypto assets such as ETH) as over-collateral is generally not considered purely algorithmic, though it may be classified as an ART and face the relevant requirements.
Future Outlook
Fully algorithmic stablecoins are effectively banned in all major regulated markets. Several projects have responded by transitioning to partially or fully reserve-backed models. MakerDAO's DAI, now rebranded as USDS, has substantially increased its allocation to real-world assets (US Treasury bills held through regulated structures) to reduce its classification risk under MiCA. Pure algorithmic designs have retreated to permissioned or DeFi-native environments where regulatory access is limited.
Legal risk: Issuing, offering, or facilitating the trading of an algorithmically stabilised stablecoin in the EU is a criminal offence under MiCA from June 2024. Penalties include fines of up to 5% of annual turnover for legal entities and personal fines for responsible individuals.
"Every serious stablecoin issuer targeting global markets needs to solve the reserve architecture first, not last. The reserve bank relationships, custody arrangements, and audit appointments are on the critical path — they take longer to establish than the legal applications themselves. Issuers who submit their EMT or OCC applications before they have confirmed banking partners typically face six to twelve months of delays waiting for reserve infrastructure to catch up."
— Dr. Marcus Hartmann, Senior Licensing Advisor
Compliance Roadmap for Stablecoin Issuers
For teams building or operating a stablecoin in 2026, the path to regulatory compliance follows a consistent sequence across jurisdictions. The specific requirements vary, but the structural steps are universal. Below is the compliance roadmap we recommend for any issuer seeking to operate in regulated markets.
Choose the incorporation jurisdiction that aligns with your target markets and the available licence type. For EU distribution, incorporate in an EU member state (France, Germany, Ireland, Luxembourg, and the Netherlands are the most active MiCA applicant jurisdictions). For US operations, evaluate whether the OCC federal path or a state charter (New York, Wyoming) is appropriate.
Your legal structure must clearly separate the stablecoin issuance entity from any related trading, exchange, or technology businesses. Most regulators require the issuer to be a standalone entity with its own capital, governance, and compliance function.
All major regimes require a regulatory-grade whitepaper or offering document before any public issuance. Under MiCA, the whitepaper must include: details of the issuer and its governance, a description of the stabilisation mechanism, reserve management policy and eligible asset composition, redemption rights and procedures, risk factors, and marketing arrangements.
The whitepaper must be submitted to the competent national authority (the relevant EU financial regulator in your member state) for review before any public offering. Under the GENIUS Act, equivalent disclosure documents must be filed with the OCC or qualifying state regulator. Allow 60–90 days for regulatory review of the whitepaper before planned issuance.
Reserve setup is the most operationally demanding element of stablecoin compliance. You must identify regulated custodians or credit institutions willing to hold your reserves, negotiate custody agreements that meet the relevant regulatory requirements for segregation and asset eligibility, appoint an independent reserve auditor, and implement a real-time or near-real-time reserve reporting system.
Banking access is the critical bottleneck. Many major banks remain reluctant to provide custodian services to crypto issuers. The most successful applicants work with banking partners well in advance of the licence application, as the regulator will expect letters of intent or executed agreements with custodians as part of the application package.
Submit the full authorisation application to the relevant regulator. The application package for an EMT issuer under MiCA typically includes: corporate documents, governance framework and board biographies, AML/CTF programme, business plan covering 3 years, financial projections, technology and security documentation, the approved whitepaper, reserve management policy, and custodian agreements.
MiCA allows national competent authorities up to 3 months to review an application, though complex applications may take longer. The GENIUS Act sets an OCC review period of 120 days for federal licence applications. Respond to all regulator queries within the stated deadlines — incomplete responses reset the clock and can result in application rejection.
Post-authorisation obligations are extensive. All major regimes require: monthly or quarterly reserve attestation by an independent auditor, annual full audit of reserves and issuer financials, regular AML/CTF reporting, prompt notification of any material change to reserve composition, governance, or technology, and transaction monitoring for suspicious activity.
Significant token issuers under MiCA face additional requirements: stress testing of reserve liquidity, recovery and wind-down planning, enhanced governance structures including an independent supervisory board, and quarterly reporting to the EBA. Build a dedicated compliance team and a compliance technology infrastructure before reaching significant token thresholds — retrofitting at scale is extremely difficult.