Regulators agree on Stablecoins in principle, not in practice
Regulatory frameworks are converging conceptually but diverging on where issuers and reserves must sit legally.
Institutional buyers already treat Stablecoins, tokenised deposits and CBDCs as distinct tools, not interchangeable substitutes for each other.
The dominant Stablecoin issuer remains largely outside the new regulatory perimeter, exposing a gap between rulemaking and market reality.
Corporate and treasury adoption, not financial markets infrastructure, is emerging as the decisive test of scale.
Regulators in the EU, UK, US, Japan, Singapore and UAE have spent the past three years building distinct rulebooks for Stablecoins, yet the discussion at Digital Money 2026 kept returning to one uncomfortable fact: the largest Stablecoin issuer by market share still sits largely outside all of them.
That tension framed the entire conversation at the panel entitled, “How will regulation change Stablecoins?”, held as part of the Future of Finance Digital Money 2026 event.
Panellists agreed regulation is broadly a positive force for the industry, but disagreed sharply on what problem it actually solves, and for whom.
The starting evidence was structural. The Stablecoin market was put at roughly US$300 billions, dominated by an issuer operating out of El Salvador whose reserves and governance sit outside the regulatory frameworks now being finalised elsewhere. That issuer's core business - institutional crypto trading conducted largely outside the United States - was described as unlikely to shift to competitors. Growth beyond that base, panellists argued, will instead come from adoption within regulated markets, and from issuers built specifically to comply with the new rules.
Audience polling reinforced where that growth is expected to come from. Respondents overwhelmingly picked cross-border payments as the arena where Stablecoins will achieve scale, far ahead of domestic payments or any expectation that banks would simply lose deposits to the new instruments (see Chart 1). The second most common answer, that jurisdictions will compete for Stablecoin issuance business, points to a coming contest over where issuers choose to domicile.
Chart 1
That contest is already visible in how regulatory frameworks differ. Conceptually, regulators converge, since all the regimes discussed address how the reserve assets that back Stablecoins are held and disclosed for the benefit of holders. Practically, they diverge. The EU was described as requiring a local issuer regardless of currency of issue. Hong Kong applies that requirement only to Hong Kong dollar-denominated coins. The UK was characterised as the strictest, requiring both a UK-incorporated issuer and UK-held backing assets. For any issuer trying to run one fungible global Stablecoin, that patchwork creates a genuine operational problem, not a theoretical one, since secondary market trading makes it nearly impossible to track how many holders sit in each jurisdiction at any moment.
Supervision by central banks was raised as a more contentious issue. Multiple regimes build in a step-up threshold, where a Stablecoin that becomes systemic is suddenly regulated more like a bank, and so faces bank-grade capital and oversight requirements. How supervisors will calibrate and enforce that step-up in practice, rather than how it reads in legislation, was described as the detail market participants still cannot reliably plan around.
That distinction matters because it means regulatory clarity is not the same thing as regulatory stability. A published rulebook is not the same as a tested central bank supervisory relationship. Panellists were explicit that firms entering the Stablecoin market without a background in financial supervision (as opposed to regulation) tend to underestimate how much discretion continues to sit with the regulator after authorisation, and not just before authorisation. .
A clear concern was the impact of Stablecoins on bank deposits. One position is that Stablecoin growth will shift competitive dynamics between banks rather than pull deposits out of the banking system, rewarding institutions that build tokenised products quickly over laggards that do not. A more critical view contested the modelling behind the proposed UK individual holding limit of £20,000 arguing it assumed a scenario of near-total wholesale deposit flight. This has no historical precedent, even during the Great Financial Crisis of 2007-09. [The limit was later scrapped by the Bank of England.]
The stronger point in that exchange was less about the limit itself than the sequencing. Critics argued that constraining a nascent instrument by relying on a worst-case modelling outcome would strangle at birth a series of use cases, such as financial markets settlement, before any evidence of systemic stress exists. A better approach would be to retain the ability to impose limits later if a genuine problem emerges.
Beneath the regulatory debate sat a more basic definitional one: what each form of digital money is actually for. Central bank digital currency (CBDC) was pitched as suited to settlement between banks and the central bank. Tokenised deposits work within a single bank or a closed network of partnering banks. Stablecoins were positioned as the truly open monetary instrument, capable of moving value between institutions that share no direct banking relationship. This is of course precisely why financial crime controls attached to Stablecoins carry more weight than those attached to tokenised forms of money that move between closed networks only.
A telling illustration came from a major US bank's tokenised money market fund, which settles in a rival issuer's dollar Stablecoin rather than the bank's own deposit token, despite a separately cited poll in which users said they trusted the bank's brand over that of the Stablecoin issuer. The implication is that institutional users are already treating these instruments as functionally distinct tools rather than interchangeable brands, with choices based on where value needs to travel rather than whose brand is behind it.
Financial crime added a genuinely unresolved tension. One view cited a Chainalysis report showing Stablecoins are now used in illicit finance more than cryptocurrencies, including a Stablecoin used heavily by Russian businesses to evade sanctions. This can be seen as an aspect of new payment infrastructures emerging outside Western-controlled payments rails, for purely geopolitical reasons. The counter-view insisted cash still accounts for the overwhelming majority of financial crime by volume, and warned against importing legacy Anti Money Laundering (AML) assumptions wholesale into a new payments technology to which existing financial crime controls must adapt.
Neither side fully rebutted the other, which is illuminating. The discussion treated financial crime risk in Stablecoins as real but poorly benchmarked against the baseline risk already present in cash and traditional banking, leaving regulators to weigh a newly visible risk against an older, larger, less visible one.
On adoption, the more interesting claim was where scale will actually originate. Rather than wholesale financial markets infrastructure, several speakers pointed to large consumer-facing corporates embedding Stablecoins into everyday commerce and supply chain payments as the likelier source of take-off. However, although powerful as distributors, consumer-facing brands will move once confident the technology will not damage customer trust, a threshold distinct from regulatory approval itself.
The implication for banks is double-edged. Costly infrastructure requirements, spanning reserve management, treasury reporting and integration of legacy and blockchain systems, were cited as the real reasons banks have moved more slowly in issuing their own Stablecoins than analysts expected once regulatory clarity was achieved. Meanwhile, unresolved questions over access to central bank money for Stablecoin issuers, and over whether bank-issued coins deserve different treatment to non-bank ones, remain live. No Stablecoin issuer can yet build a durable competitive advantage on the basis of regulatory status.
The discussion did not resolve which monetary instrument – CBDC, tokenized deposit or Stablecoin – “wins.” But it showed that “which wins?” is the wrong question to ask. Stablecoins, tokenised deposits and CBDCs are being built for different jobs, regulated by different logics, and adopted by different users at different speeds. A practical consequence for banks, issuers and corporates is that national regulatory perimeters are being drawn well without sufficient regard to the global context. Participants in the Stablecoin industry must contend with a global marketplace that is being fragmented by national priorities.
