Stablecoins are digital tokens designed to maintain a stable value, typically pegged to the US dollar. They combine the speed of blockchain-based transfers with the price stability of traditional currency, making them useful for payments, settlement and treasury operations.

But the word stablecoin covers a wide range of products. Some are issued by regulated financial institutions with audited reserves and clear redemption rights. Others operate with limited transparency, no independent verification and no enforceable consumer protections. Let’s dive into what a regulated stablecoin looks like.

What regulation actually requires

A stablecoin is considered regulated when its issuer operates under the supervision of a financial authority and meets specific standards for reserves, disclosure and consumer protection. While the details vary by jurisdiction, regulated stablecoins generally share a common set of requirements across the major regulatory frameworks now in force:

• Licensed issuer: The entity issuing the stablecoin holds a charter or license from a recognized financial regulator, not just a general business registration.

• 1:1 reserve backing: Every token is backed by high-quality, liquid assets such as cash, US Treasury bills or approved equivalents. These reserves are segregated from the issuer’s own funds.

• Independent verification: Reserve holdings are confirmed through regular independent attestations or audits, not self-reported numbers.

• Redemption rights: Holders can redeem tokens for fiat currency at face value, under published terms.

• AML/CFT compliance: Issuers implement Know Your Customer procedures and anti-money-laundering controls as required by law.

How regulation works across jurisdictions

Three major frameworks now define what it means to operate as a regulated issuer:

In the United States, the GENIUS Act (signed July 2025) created the first federal framework for payment stablecoins. Issuers must maintain 1:1 reserves in cash, deposits at insured institutions or short-term US Treasuries. Monthly reserve attestations must be examined by a PCAOB-registered accounting firm, and the issuer’s CEO and CFO must personally certify their accuracy. Only banks, credit union subsidiaries, OCC-chartered nonbanks or approved state-licensed entities may issue payment stablecoins. Issuers above $10 billion in outstanding stablecoins must operate under federal oversight. In insolvency, stablecoin holders receive a super-priority claim above administrative expenses, and reserves are excluded from the bankruptcy estate.

Not all regulatory licenses are equivalent. In the US, some stablecoin issuers operate under state money transmitter licenses (MTLs). MTLs authorize a company to move fiat currency on behalf of customers, but they do not impose specific requirements on stablecoin issuance, reserve composition or reserve attestation. Prudential regulators like the OCC or NYDFS apply banking-level standards for safety, soundness and consumer protection.

In the European Union, the MiCA (Markets in Crypto-Assets) Regulation came into full effect in 2025. MiCA requires issuers to be licensed as e-money or credit institutions, maintain full reserves and publish regular audits. The framework also restricts the use of non-euro stablecoins within the EU, pushing toward euro-denominated alternatives and tighter oversight of cross-border stablecoin activity.

In Singapore, the Monetary Authority of Singapore (MAS) regulates stablecoin issuers through the Payment Services Act. Issuers must hold a Major Payments Institution license. In addition, the forthcoming Single Currency Stablecoin framework will impose additional requirements, including that an issuer must: maintain 1:1 reserves in cash or cash equivalents held in segregated accounts and meet ongoing compliance and disclosure requirements. Singapore’s framework is recognized as one of the most forward-looking in Asia.

These frameworks are converging on the same core principles—reserve quality, issuer accountability, consumer protection—even as they differ in structural details.

Comparing the three frameworks

Why this matters

In 2022, the collapse of TerraUSD, an algorithmic stablecoin with no fiat reserves, destroyed roughly $40 billion in value. In 2025, S&P Global Ratings downgraded Tether’s USDT stability assessment over reserve composition concerns. 

Regulation creates a verifiable floor: licensed issuers, audited reserves, enforceable redemption rights and accountability when things go wrong. For institutions evaluating stablecoins for treasury, payments or settlement, these protections are baseline requirements.

Where Paxos fits

Paxos is one of a small number of stablecoin issuers that operates under multiple global regulatory frameworks simultaneously. 

Paxos holds a national trust charter from the OCC in the United States, a Major Payments Institution license from MAS in Singapore and issues digital assets under MiCA compliance through FIN-FSA in the EU.

Paxos issues four digital assets: Global Dollar (USDG), issued by MAS regulated and MiCA compliant entities; PayPal USD (PYUSD) and Pax Dollar (USDP) issued under OCC federal oversight; and Pax Gold (PAXG), the only institutional-grade gold token issued under US federal regulatory supervision.

All Paxos-issued stablecoins are backed 1:1 by cash and US Treasury bills, with reserves held in segregated accounts and verified through monthly independent attestations.

If you’re interested in offering blockchain and digital asset solutions to your customers, Paxos can help. Contact us to learn more.

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This post is provided for informational purposes only and does not constitute legal advice. Readers should consult their own legal counsel regarding any legal matters or requirements relevant to their specific situation. Paxos makes no representations or warranties regarding the legal accuracy, completeness, or suitability of the information contained herein.