2.1 Payment stablecoins (USDC, USDT)
The first flavour is the one most people mean: a single-currency, fiat-backed token whose issuer holds reserves intended to make every unit redeemable one-for-one against the reference currency. USDC and USDT dominate this category by float, with a long tail of smaller issuers in EUR, SGD, BRL, and others.
The interesting part is not the mechanics. You know the mechanics. The interesting part is how different jurisdictions have decided to license the issuer.
Under MiCA, this kind of instrument is an e-money token (EMT), and the issuer must be either a credit institution or an authorised electronic money institution. The reserve must be 1:1, must be held in segregated accounts at credit institutions or in highly liquid low-risk assets, and the holder has a statutory right to redeem at par at any time, in the reference currency, free of fees. EMT issuers face caps on usage as a means of exchange once they cross significance thresholds, and significant EMTs face additional governance and reserve composition requirements supervised by the European Banking Authority (EBA).
Under the Hong Kong Stablecoins Ordinance, passed and gazetted in 2024 with the licensing regime commencing 1 August 2025, a fiat-referenced stablecoin issuer must hold a licence from the Hong Kong Monetary Authority (HKMA), must maintain reserves of high-quality liquid assets at least equal to the par value of the stablecoin in circulation, must segregate those reserves, and must give holders a redemption right at par. The HKMA supervisory guideline defines the operational granularity. The licence is its own perimeter, distinct from a banking licence, although banks can apply.
Under the GENIUS Act framework, payment stablecoins are issued by permitted payment stablecoin issuers, which can be subsidiaries of insured depository institutions, federally qualified non-bank issuers, or state-qualified issuers below a $10 billion outstanding-issuance threshold, above which they must transition to federal supervision. Reserves must be held in cash, short-dated Treasuries, repo, and similar narrow instruments. Issuers are prohibited from paying interest to holders.
Under Japan's Payment Services Act (PSA), the stablecoin amendments effective June 2023 limit issuance of fiat-pegged stablecoins to banks, fund-transfer service providers (FTSPs), and trust companies. All three routes are live in practice. The FTSP route has been the most active, with JPYC the worked example: the Financial Services Agency (FSA) registered JPYC as an FTSP on 18 August 2025 and JPYC launched the first FSA-approved yen-denominated stablecoin on 27 October 2025, backed 1:1 by cash deposits and Japanese government bonds. The trust-issuance route, where a trust company holds the reserve and issues beneficial interests as the on-chain instrument, is in production at megabank consortia such as Progmat (see Progmat architecture). Bank-direct issuance remains an option but has been slower to ship.
The thread across all of these: the regulator is treating the payment stablecoin as a near-substitute for cash held with a non-bank, and is constructing a perimeter that resembles the e-money or narrow-bank model rather than the bank deposit model. The issuer does not lend the reserves. The holder does not earn interest. The point is bearer-style transferability with credible redemption, not yield. The CPMI-IOSCO PFMI overlay for stablecoin arrangements is the supervisory floor that all four regimes have built on.
Operationally, payment stablecoins are usable for payments by definition, usable as collateral in many DeFi venues and a growing number of TradFi venues, and bearer-transferable on-chain subject to issuer-level allow/blocklists. They are the closest thing in production to programmable digital cash. Whether your counterparty's stablecoin is acceptable on your balance sheet typically reduces to the four-regime question above: which licence, which reserve rules, which redemption mechanic, which regulator.