Stablecoin Regulation Explained: EU and US Reserve Rules

Why reserve and redemption rules decide the business case

A stablecoin is a claim on an issuer, not a bank deposit. Who may issue it, what sits behind it, how quickly a holder is paid, and what data the issuer and its payment partners must collect are now written into law in the two largest markets.

In the EU, the Markets in Crypto-Assets Regulation has been live since 2024: Regulation (EU) 2023/1114. In the US, the federal framework arrived with the GENIUS Act, Public Law 119-27, signed on 18 July 2025 and effective from January 2027 at the latest.

For a payments or tokenisation team the questions are narrow: which entity may issue, what the reserve may contain, who may redeem and when, and what you must know about the people moving the tokens. This is education, not a view on any token.

The EU: two token types, two sets of obligations

MiCA splits fiat-referencing tokens into e-money tokens (EMTs), which reference a single official currency, and asset-referenced tokens (ARTs), which reference a basket or other assets. Titles III and IV applied from 30 June 2024, per the European Banking Authority; the remaining provisions, including licensing of crypto-asset service providers, applied from 30 December 2024.

E-money tokens: par redemption from a licensed issuer

An EMT must be issued by a credit institution or an electronic money institution authorised in the EU. MiCA treats these tokens as electronic money, so the holder has a legal claim on the issuer and a right to redeem at any time at par value in the referenced currency, and issuers may not pay interest on the tokens. The par claim is a right, not a market convention — and the obligation to pay sits with the issuer, not with the network.

Asset-referenced tokens: permanent redemption at market value

ARTs work differently. Holders have a permanent right of redemption, but the issuer redeems at the market value of the referenced assets, net of costs, rather than at a fixed par value, and the issuer bears losses on the reserve investment.

Reserves, disclosure and "significant" tokens

Article 54 of MiCA requires an EMT issuer to hold at least 30% of the funds received in separate accounts at credit institutions, with the remainder invested only in secure, low-risk, highly liquid instruments denominated in the same currency as the token.

Size changes supervision. Under Article 43(1) of MiCA, a token is classified as significant where the number of holders exceeds 10 million, where the value of the token issued, its market capitalisation or the size of the reserve exceeds €5 billion, or where it averages more than 2.5 million transactions a day worth more than €500 million. The same size tests are used for e-money tokens. Significance moves the token into EBA-led supervision and adds further reserve, liquidity and disclosure obligations.

The US: the GENIUS Act framework

What counts as an eligible reserve

A permitted payment stablecoin issuer must maintain identifiable reserves on at least a 1:1 basis, limited to the categories listed in section 4 of the Act (12 U.S.C. 5903) and reproduced in the bill text:

• US coins and currency, or balances at a Federal Reserve Bank;
• demand deposits or insured shares at an insured depository institution;
• Treasury bills, notes or bonds with a remaining maturity of 93 days or less;
• overnight repurchase agreements backed by such Treasury paper;
• overnight reverse repos, whether tri-party, centrally cleared, or bilateral with a counterparty judged creditworthy even under severe market stress;
• shares of registered government money market funds invested solely in those assets;
• other similarly liquid federal assets approved by the supervisor, plus tokenised versions of the eligible reserves.

Reserves may not be pledged, rehypothecated or reused, except for narrow purposes such as margin on permitted repo investments or meeting reasonable redemption demand. That anti-rehypothecation rule is the closest US analogue to the EU's separate-accounts requirement.

Redemption, fees and monthly disclosure

Issuers must publish a redemption policy with clear procedures for timely redemption, disclose all purchase and redemption fees in plain language, give consumers at least seven days' notice before changing those fees, and accept that any discretionary limit on timely redemption may be imposed only by a regulator, not by the issuer itself.

Transparency is periodic rather than real-time. The issuer must publish the monthly composition of its reserves — total tokens outstanding, the amount and composition of the reserve, and the average tenor and geographic location of custody for each reserve category — examined by a registered public accounting firm, with the chief executive and chief financial officer certifying accuracy to the supervisor.

The Act itself only requires "timely" redemption; the numeric limit comes from implementing rules. The Federal Reserve's September 2026 proposal would require a Board-supervised issuer's policy to include a redemption period of no more than two business days, and commentary on the OCC's final rule of October 2026 describes a two-business-day outer limit there as well.

The $10 billion line between state and federal supervision

Section 4(c) of the Act (12 U.S.C. 5903(c)) lets a state-qualified issuer with consolidated outstanding issuance of not more than $10 billion opt for state regulation, provided the state regime is certified as substantially similar to the federal framework. Above that level an issuer must transition to federal or joint supervision within 360 days, obtain a waiver, or stop issuing new tokens on a net basis until it is back under the limit — the transition mechanics are set out in the OCC's proposed rule.

The Congressional Research Service cautions against reading the threshold as an automatic federal licence requirement: crossing $10 billion brings joint state-federal supervision, and supervisors may waive their role.

When it starts

The Act takes effect on the earlier of 18 January 2027 or 120 days after the primary federal regulators issue final implementing rules, as the Federal Reserve Board memo and the OCC confirm. The Act asks those regulators to complete notice-and-comment rulemaking within a year of enactment, that is by 18 July 2026 — a date that passed with the framework only partly finished. The OCC published its final rule on 21 October 2026, the Board's rules on reserves, redemption and applications were still proposals on 29 September 2026, and the OCC states that bank secrecy, anti-money-laundering and sanctions rules will come in a separate rulemaking coordinated with the Treasury. Three years after enactment — 18 July 2028 — digital asset service providers may no longer offer stablecoins issued by unpermitted issuers, per the CRS analysis.

AML, sanctions and consumer protection

Licensing is only half of the build. The other half is knowing your counterparty.

In the EU, the Transfer of Funds Regulation, Regulation (EU) 2023/1113, has applied to crypto-asset transfers since 30 December 2024. Provider-to-provider transfers carry originator and beneficiary information with no de minimis threshold; the EUR 1,000 threshold that exists for transfers of funds does not create a floor for crypto transfers between providers, though transfers to or from a self-hosted address above that amount trigger additional verification. EBA travel rule guidelines govern how providers detect missing or incomplete information, and sanctions screening is built into the same policies. The wider AML package, Regulation (EU) 2024/1624, applies from 10 July 2027 and will consolidate obligations across the bloc.

In the US, permitted issuers are brought within the Bank Secrecy Act framework as financial institutions, so an AML programme, recordkeeping, suspicious activity reporting and sanctions compliance apply to the issuer itself, as the CRS summary sets out — with the detailed AML and sanctions rule text still to come from the joint Treasury rulemaking. Issuers under pre-existing state regimes, such as New York's, face those state obligations in parallel.

Consumer protection is deliberately issuer-facing in both regimes: fee disclosure, redemption policy, reserve reporting and complaint handling sit with the licensed entity. A wallet provider or exchange in front of the customer still needs its own disclosure processes — and, in the EU, its own licence.

Compliance cost, side by side

Risks and costs

• Issuer credit risk. The holder's claim is on the issuer. A payment stablecoin is not a deposit, and legal protections reduce the risk without removing it.
• Reserve and market risk. Short-dated Treasury holdings carry duration and rate risk, bank deposits carry concentration and counterparty risk, and custody arrangements carry operational risk.
• Redemption liquidity risk. Redemption demand can spike suddenly, including outside banking hours when reserve assets cannot be sold or moved. Regulators can impose limits on timely redemption, and in the EU redemption depends on the issuer actually holding liquid assets.
• Compliance build cost. An e-money or credit institution licence in the EU, or OCC approval or a certified state licence in the US, plus capital, audits, monthly reserve examination and certification, transaction monitoring, travel-rule data capture and storage, sanctions screening, key management and a wind-down plan.
• Jurisdiction risk. Rules are not portable: an EU licence does not authorise US issuance, and a US charter does not permit marketing into the EU without an EU entity. A last-minute rule change in one market can strand a product roadmap.
• Settlement risk for accepting firms. The tokens settle on their own networks with their own cut-offs, a different profile from the EU instant payments regime and from tokenised money market funds, both of which carry their own redemption and custody constraints.

Bottom line

The EU regime is live and prescriptive: licensed issuers, a 30% credit-institution floor for e-money token reserves under Article 54, par redemption at any time, size tests that bring large tokens under EBA supervision, and travel-rule data on every provider-to-provider transfer. The US regime is later and narrower: 1:1 reserves in eligible government and bank assets, a $10 billion line between state-optional and federal supervision, fee and redemption transparency with monthly reserve examination, a January 2027 start, and a 2028 deadline for unpermitted coins on US platforms.

For payments and tokenisation teams the work is unglamorous and mostly pre-launch: pick the jurisdiction and licence type, line up reserve custody and reporting, build 24/7 redemption capacity, and wire AML, sanctions and travel-rule data into the minting and routing stack. It is a cost and control question for builders — and none of it is a view on whether anyone should hold a stablecoin.