Financial Stability Institute paper: regulating stablecoin issuance – permissible entities and activities

Stablecoins are a category of privately issued cryptoassets that aim to maintain a stable value against a reference asset, most commonly the US dollar. They can be broadly classified into two categories: money-like stablecoins, which are pegged to fiat currencies and intended for use in payments; and investment-like stablecoins, which function similarly to securities by offering returns through blockchain-based activities.

The stablecoin market has grown significantly over the past two years but has plateaued at around USD 300 billion to 320 billion since October 2025. Despite this growth, stablecoins still represent a small share of the global crypto market, accounting for approximately 7% of total capitalisation. The market is also highly concentrated, with two issuers accounting for approximately 90% of stablecoin market capitalisation.

While the vast majority of stablecoin transactions currently relate to crypto trading, stablecoins are increasingly positioning themselves as a new means of payment, particularly for cross-border transactions, and a borderless store of value. However, they continue to be primarily used within the cryptocurrency ecosystem, where they act as a bridge between volatile unbacked cryptoassets and fiat currencies. Stablecoins are also used in decentralised finance (DeFi), providing a more stable settlement asset, serving as collateral for loans and offering a way to hedge cryptoasset volatility without having to convert to fiat or exit DeFi.

Money-like stablecoins in particular show the greatest promise for integration into traditional finance and are the primary focus of legislative frameworks. These stablecoins typically circulate on public, permissionless blockchains and can be integrated with smart contracts, enabling programmability and atomic settlement. In addition, they are designed to offer stability, backed by a pledge from issuers to holders that the tokens can be redeemed at par value, typically one unit of fiat currency for each token. To enhance the likelihood that issuers fulfil this promise and to address the risks associated with stablecoin arrangements, many jurisdictions have introduced regulatory frameworks.

However, regulatory approaches to money-like stablecoins vary significantly in several important areas, such as the type of entities permitted to issue stablecoins and the scope of permissible business activities beyond core issuance functions. These differences matter. First, depending on the eligible entity, the extent to which specific regulatory controls are needed varies. In particular, certain specific activitybased controls may be more relevant for issuing non-banks than for banks, which are already subject to comprehensive prudential regulation and oversight. Furthermore, the activities beyond stablecoin issuance that entities are allowed to engage in (eg lending, staking6 or custody services) change their overall risk profiles and the safeguards required for their core issuance operations.

Against this backdrop, this paper provides a comparative analysis of the regulatory frameworks for stablecoin issuers across the European Union (EU), Hong Kong SAR (HK), Singapore (SG), the United Kingdom (UK) and the United States (US). Some of these frameworks are finalised, while others are still under development, meaning that further changes or updates may occur as these frameworks evolve.

Section 2 examines the entities permitted to issue stablecoins, including both domestic and foreign-incorporated issuers, as well as frameworks for systemic issuers. Section 3 analyses the scope of permitted activities for authorised issuers, distinguishing between core issuance activities and the provision of other crypto services. Section 4 highlights key policy considerations. Section 5 offers
concluding remarks.

Highlights

. Regulatory approaches for stablecoin issuance differ significantly, particularly in terms of the types of entities allowed to issue them and the scope of activities permitted beyond core issuance. These differences are important since additional activities such as lending, staking or providing custody services can alter an entity’s risk profile and influence the safeguards needed for its core issuance operations.

. Stablecoin frameworks generally limit issuers to a core set of functions such as issuance, redemption and reserve management, but they differ in how far issuers may stray from them. Frameworks that allow banks to issue under existing prudential regimes tend to permit a broader range of activities, as their regulatory framework already mitigates associated risks. In constrast, bespoke regimes for stablecoin issuers impose stricter limits.

. These activity restrictions apply to the issuing entity rather than the group. For banks, consolidated supervision already constrains the relocation of activities to affiliates; for non-banks, no equivalent group-wide framework applies, and restrictions can be circumvented with corporate structuring. This suggests stablecoin frameworks, or related regimes, may need to extend group-level oversight to non-bank issuers, especially for larger groups. Such oversight would be particularly important unless other measures, proportionate to the level of risk, are in place to effectively mitigate risks arising from other group activities.