- Stablecoins played an important role when it comes to bridging traditional finance with digital finance.
- Stablecoin regulation is picking up the face as global countries such as the EU, Singapore, Hong Kong, UK, and the US are creating stablecoin guidelines.
Stablecoins have become an undeniable part of the crypto industry by merging traditional finance with digital finance. The prevalence of their usage in traditional finance has called for regulatory scrutiny across various countries. Today, stablecoin regulation is on the front lines when it comes to regulating the broader crypto market.
But, how far have global countries come in creating guidelines for stablecoins? This is what we will uncover in the present article.
Stablecoins Overview
Stablecoins have their fair share when it comes to global crypto adoption. They maintain a constant value by pegging their value to assets such as fiat currency, commodities, stocks, etc. This nature is what makes stablecoins stand out in the crypto industry.
The very nature of maintaining a stable value despite being a cryptocurrency that lives on blockchain is the reason why stablecoins are finding numerous applications. From decentralized finance to borderless transactions, stablecoins are everywhere. They even operate at the intersection of TradFi and DeFi for the conversion of fiat currency to crypto.
A recent Chainalysis report found that stablecoin usage is standing above 40%, while Bitcoin usage for transactions is only around 17% in most countries. Latin America, Eastern Asia, and Eastern Europe are leading in using stablecoins for transactions. The increase in stablecoin usage has made it mandatory for regulating this space in countries across the globe.
Tether’s USDT and Circle’s USDC are the two largest stablecoins in the crypto industry. They collectively contribute more than $200 billion to the overall crypto market cap. The stablecoin market consists of several other notable tokens such as DAI, USDe, FDUSD, PYUSD, etc.
The Global Trend of Stablecoin Regulation and Policy
The stablecoin regulation trend is catching on across the globe by the day. Below are some of the top countries that quickly jumped on the bandwagon to regulate stablecoins. The EU, Singapore, and Hong Kong acted quickly in terms of stablecoin regulation. The US entered the race to create clear guidelines for stablecoins after Donald Trump’s re-election in 2024.
European Union (EU)
The EU introduced Markets in Crypto Assets last year to regulate cryptocurrencies on June 30, 2024. The major focus of their stablecoin regulation is security and transparency. MiCA classified stablecoins into electronic money tokens and asset-referenced tokens to simplify guidelines.
MiCA detailed some stringent reserve requirements for stablecoins. It requires stablecoin issuers to maintain at least 30% of reserves in deposits. Remaining reserves need to be invested in highly liquid assets. Stablecoin issuers must register themselves as either credit institutions or electronic money institutions.
Singapore
Singapore entered the race of stablecoin regulation much before most countries in 2023. Its regulation framework covers different types of stablecoins pegged to different types of assets. The country’s stablecoin issuers must maintain stability, redemption capability, capital requirements, and transparency.
Hong Kong
The Hong Kong Monetary Authority introduced the Stablecoin Bill in 2024 and detailed license requirements for local stablecoin issuers. They must maintain reserve asset management, redemption capabilities, and meet AML and counterterrorist financing. Stablecoin issuers must pay a penalty of HK$5,000,000 and face up to 7 years of imprisonment in case they violate its rules.
United Kingdom (UK)
The Bank of England (BoE) and the Financial Conduct Authority (FCA) of the UK prioritize stablecoin regulation in the country. They published the first phase of the proposals in 2023 to regulate fiat-based stablecoins. This draft addressed some of the risks involved with stablecoins when used as a means of payment, mimicking fiat money.
The second phase of stablecoin regulation in the UK covers algorithmic and commodity-backed stablecoins. Meanwhile, FCA plans to bring numerous policy publications on cryptocurrencies by this year. A complete regulatory regime for crypto assets in the UK might see the light by the end of next year.
Japan
Japan is also one of the early countries that addressed the need for stablecoin regulation. It modified its Payment Services Act (PSA) in 2022 to create a regulatory framework for stablecoins. It came into effect in June 2023 and also made it mandatory for all stablecoin issuers to comply with AML and CFT regulations.
United States (US)
The US lawmakers are coming up with bills to regulate cryptocurrencies at lightning speed as Donald Trump aims to make the country a crypto capital. Trump and David Sacks have addressed the importance of stablecoins and their potential to increase dollar dominance multiple times in their interviews and speeches.
The Guiding and Establishing National Innovation in US Stablecoins (GENIUS) Act was introduced to create a regulatory framework for stablecoins. The bill has not yet been passed in the US Senate. Meanwhile, another bill called the STABLE Act was introduced in the House Financial Services Committee.
The STABLE Act bill was passed in the US in April 2025. It gained a majority of the votes in the Senate even after facing challenges, such as government officials involved with crypto. The SEC issued a statement on the same, detailing rules for “Covered Stablecoins.”
How Does Stablecoin Regulation Contribute to Overall Crypto?
Stablecoins occupy a large part of the crypto ecosystem, and providing clear guidelines for them is half the job done for the crypto industry. These regulations and policies act as a guide for creating an overall crypto regulatory framework by simplifying the process.
Transparency and accountability from stablecoin issuers are crucial to eliminate stablecoins that operate with the lack of a strong foundation. Addressing risks and challenges involved with stablecoins helps governments pave the way for overall crypto regulation.
Conclusion
Lawmakers’ efforts to regulate the entire crypto space are starting with stablecoins due to their prevalence in everyday use cases and adoption. From the UK and the US to Japan and Hong Kong, stablecoins have already come under the regulatory radar.
Regulation is not only necessary for the crypto space to grow, but also mandatory to avoid the risks and challenges it would bring to traditional finance. It is only a matter of time until we see a full-fledged crypto regulation in the top countries.
