Stablecoins are often treated as a single category of digital asset: tokens designed to maintain a stable value, usually against a fiat currency. But stablecoins differ in how they are designed, backed and used — differences that are often masked by the singular label. In its new report, ‘The Stablecoin Toolkit: Part II: Law, Regulation, and Monetary Policy’, the Wharton Blockchain and Digital Asset Project examines what these differences mean for law, regulation and monetary policy. Its central argument is simple: stablecoins’ structural differences are not merely technical; they shape the legal, regulatory and monetary-policy questions they raise.
Why does structure matter?
Stablecoins can have very different reserve structures, redemption mechanisms and custody arrangements. Consider two stablecoins, for instance. One may give its holder a direct claim on an issuer, backed one-for-one by segregated, high-quality liquid assets that can be redeemed at par. Another may rely on an algorithmic mechanism or a synthetic arrangement rather than a pool of identifiable reserve assets. Both may be described as stablecoins, but they do not necessarily create the same legal relationship or carry the same risks.
According to the report, this has consequences across three areas.
First, private law. The different relationships stablecoins create between the token, the issuer, the reserves, the custodian and the person holding the token can affect what legal rights can be identified. They can also influence how courts determine which country’s law should govern those rights. This matters when determining who owns a token, what happens to it if an issuer becomes insolvent, or which law applies when a transaction crosses borders. Despite jurisdictions increasingly recognising digital assets as property, unresolved questions remain around settlement finality, insolvency and cross-border transactions.
Second, financial regulation. The report highlights a significant degree of international convergence, with major jurisdictions increasingly regulating a similar type of stablecoin: one denominated in fiat currency, redeemable at par, backed by segregated high-quality liquid assets and issued by a licensed and supervised entity. However, algorithmic, synthetic and certain offshore stablecoins can fall outside these frameworks, be subject to different requirements or be prohibited. This creates questions around regulatory gaps and arbitrage, and whether existing frameworks adequately address the risks posed by stablecoins that fall outside the regulated core.
This is where the report makes an important distinction: regulatory convergence around one type of stablecoin should not be mistaken for a case for uniform regulation of all stablecoins.
Third, monetary policy. The implications also extend beyond individual stablecoins and their users to the wider financial system. As stablecoins become more integrated with traditional finance, they could affect bank deposits, the transmission of monetary policy and competition between private and central-bank money. The report also considers whether interest-bearing stablecoins could accelerate the movement of funds away from banks during periods of stress, and whether widely used dollar-denominated stablecoins could contribute to currency substitution in other economies.
Taken together, these issues point to the report’s central policy challenge: how can policymakers establish common safeguards for stablecoins while accounting for meaningful differences in how those stablecoins are structured and the risks they create?
What does the report recommend?
The report does not argue for a single regulatory model for every stablecoin. Instead, it points towards a combination of common baseline safeguards and differentiated treatment, with legal classification, regulatory architecture and monetary-policy considerations informed by the structural features of each stablecoin.
Common safeguards are particularly relevant for regulated, reserve-backed stablecoins. These include one-to-one reserve backing, high-quality liquid assets, legal segregation of reserves, timely redemption and appropriate verification. The report also highlights the need for clearer rules around holders’ rights, custody, insolvency and consumer protection.
At the international level, the report points to the need for greater coordination and a common taxonomy that links a stablecoin’s legal and regulatory treatment to its underlying design.
The objective, then, is not uniformity for its own sake. It is to establish common safeguards where risks are shared, while allowing legal and regulatory requirements to differ where stablecoins’ structures, functions and risks differ.
For policymakers, the starting point is therefore not simply asking how to regulate stablecoins but first understanding what kind of stablecoin they are regulating.