part5. The Regulatory Gauntlet: From the Wild West to an Era of Order ⚖️
As stablecoins have emerged as a critical component of the global financial system beyond a mere technical experiment, regulators worldwide can no longer ignore them. In particular, the 2022 Terra-Luna crisis clearly demonstrated the destructive systemic risks that regulatory gaps can cause, becoming a decisive turning point for governments to actively build regulatory frameworks. Regulation now functions not as an obstacle to innovation but as a key strategic tool to secure market trust, protect consumers, and safeguard national interests in the ‘digital currency cold war.’
Awakening in the Post-Terra Era: The ‘Wild West’ Is Over
The collapse of Terra-Luna imprinted the inherent risks of stablecoins—especially algorithmic models with unclear or no collateral—on the global consciousness. This event proved regulators’ concerns about potential threats to financial stability were not unfounded and fostered a global consensus that stablecoins must be integrated into existing financial regulatory frameworks. The market’s focus has completely shifted from ‘whether to regulate’ to ‘how to regulate.’
Global Regulatory Competition: Convergence Toward Standards and Strategic Differences
Countries adopt different approaches based on their financial environments and strategic goals, but are converging on several common principles.
- European Union (MiCA): The EU’s Markets in Crypto-Assets (MiCA) regulation is a pioneering example of the world’s first comprehensive crypto-asset regulatory framework. MiCA classifies stablecoins as ‘Asset-Referenced Tokens (ART)’ and ‘Electronic Money Tokens (EMT),’ imposing strict licensing requirements on issuers, reserve requirements (1:1 backing with high-quality liquid assets), and mandatory redemption rights for all holders. The ‘passporting’ system allows a license obtained in one member state to operate across the entire EU, creating a single market. However, potential regulatory arbitrage due to differences in supervisory capabilities among member states remains a challenge.
- United States: While there is no single federal law yet, regulations are gradually being clarified at both state and federal levels. New York pioneered a leading regulatory environment with its ‘BitLicense.’ Federal bills such as the ‘GENIUS Act’ and ‘STABLE Act’ have been proposed to regulate the issuance and operation of payment stablecoins. Underlying U.S. regulatory discussions is a strong strategic intent to leverage stablecoins as a tool for financial innovation to maintain the dollar’s global reserve currency status in the digital age.
- United Kingdom: The UK is taking a phased approach to incorporate ‘stablecoins used as means of payment’ into existing financial services regulations. The Financial Conduct Authority (FCA) has proposed specific rules for stablecoin issuance and custody activities, clarifying requirements on collateral composition, management, redemption (T+1, i.e., payment by the next business day after redemption request), transparency, and disclosure. This pragmatic approach aims to embrace innovation while controlling risks at levels comparable to traditional financial products.
- Singapore: Singapore has established the world’s first independent regulatory framework for stablecoins, strengthening its position as a global digital asset hub. The Monetary Authority of Singapore (MAS) mandates licensing for all digital token service providers and strictly applies international standards for anti-money laundering (AML) and counter-terrorism financing (CFT). This framework clearly defines issuance requirements, reserve management, redemption procedures, and disclosure obligations to provide market stability and predictability.
Regulation as a Partner of Innovation: Trust Is Competitiveness
While early markets perceived regulation as a hindrance to innovation, clear regulation now acts as a competitive advantage. The narrowing market share gap between USDC, which emphasizes regulatory compliance, and USDT, which faced regulatory uncertainty, exemplifies this.
Regulatory clarity provides companies and institutional investors with a foundation to enter the stablecoin ecosystem and build related infrastructure without uncertainty. This creates a virtuous cycle that attracts more capital and talent, fostering growth across the entire industry. Governments’ competitive efforts to establish regulatory frameworks go beyond risk control—they are strategic moves to secure leadership in the future digital finance industry.
These global regulatory trends offer important insights. Rather than inventing entirely new rules to manage stablecoins, regulators worldwide are ‘applying’ core principles from decades of electronic money (e-money) and money market fund (MMF) regulations to the new technological environment. Specifically, the four principles of ▲100% backing by high-quality liquid assets, ▲immediate redemption rights for holders, ▲licensing and prudential supervision of issuers, and ▲regular audits and transparent disclosures have become global standards. This is an essential process for stablecoins to be integrated into mainstream financial systems and creates an environment favoring large institutional players who can bear high regulatory compliance costs.
Continued in part6. The Dawn of New Financial Literacy, Become a Wise Navigator
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