What Boards Must Know About Stablecoins

Stablecoins are a type of cryptocurrency designed to maintain a stable value by pegging their price to a reference asset — a fiat currency, like the U.S. dollar or euro. Under the European Union’s Markets in Crypto-Assets Regulation (MiCA), they are known as Electronic Money Tokens (EMTs) to differentiate them from tokens backed by assets such as gold.

They work by having an issuer of stablecoins create them on a public blockchain, where they can be transferred by simply moving them between digital “wallets.” The issuer pegs the value of the stablecoin in some way, typically by keeping reserves in assets like U.S. deposits and treasury bills and establishing a legal guarantee for the stablecoin holder’s right of exchange for those assets.

Stablecoins may be issued by a central bank called Central Bank Digital Currency (CBDC), as in China with the digital yuan (called e-CNY), or issued by a private company, such as USDC, a dollar-based stablecoin issued by Circle.

A central bank-issued stablecoin is a fiat currency. It is backed by the public’s trust and confidence in the issuing government. A private stablecoin is a form of private money, similar to the value found in the concept of a gift card. Its value is dependent both on the underlying currency and on the public’s trust and confidence in the issuing company. In the United States, the big difference between a stablecoin and a gift card is that the former can currently be legally converted back to fiat currency under some state laws (New York, Texas and California), while the latter can only be spent with the merchant.

There is increasing legislation around stablecoins. The European Union (EU) adopted the MiCA regulation inMay 2023, which was fully implemented in December 2024. The U.S. Congress is currently considering two significant pieces of legislation aimed at establishing a regulatory framework for stablecoins: the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act and the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. If passed, these would establish federally regulated stablecoins.

To understand the purpose of stablecoins, it’s helpful to start with the three primary functions of money: medium of exchange (means of payment), store of value (preserves wealth) and unit of accounting (provides the ability to compare value of goods and services).

The prime function of stablecoins or EMTs is as a medium of exchange. Their main utility is to transfer value between parties by sending stablecoins. For users in countries with a rapidly depreciating currency, they also act as a store of value — a safer version of stuffing dollar bills under the mattress.

The prime function of gold-backed stablecoins, known as asset-backed tokens (ABTs), is as a store of value and wealth preservation — a safer version of burying gold in the backyard.

Stablecoins are not a unit of accounting — the whole point being their value is pegged 1:1 to the underlying asset.

The SEC issued guidance on April 4, 2025, stating “covered stablecoins” are not deemed to be securities. They are defined as being designed to maintain a stable value relative to the U.S. dollar (USD) on a one-for-one basis, can be redeemed for USD on a one-for-one basis (i.e., one stablecoin to one USD) and are backed by assets held in a reserve that are considered low-risk and readily liquid with a USD value that meets or exceeds the redemption value of the stablecoins in circulation. This clarifies that, in these circumstances, stablecoins are not securities, therefore they can be used by anyone, like fiat currencies.

The current value of stablecoins outstanding in April 2025 is now approximately $235 billion, nearly all based on U.S. dollars, but there are also stablecoins based on Euros and other currencies. Circle, the company behind the USDC stablecoin, has recently filed an S1 for an IPO on the New York Stock Exchange.

The use of stablecoins is increasingly being woven into traditional financial services and we expect this to pick up now that the regulatory framework has made it easier for U.S. banks to engage with crypto. They are becoming increasingly important to companies because they have the potential to become a competitor to existing payment “rails,” such as Visa, Mastercard, bank wires and checks.

The key benefits of stablecoins are that they allow 24/7 transfer in any size from a few dollars to hundreds of millions of dollars with certainty of payment (no charge back) at very low cost. They are particularly useful in countries with more limited banking and international payments, which is a key reason why Starlink, the global satellite communications company, offers payment via stablecoins. This also removes the need for Starlink to have treasury operations in every country where it operates.

The ability to pay in near real-time reduces the counter-party risk without the cost and complexity of a credit-providing intermediary, and the payments are received instantaneously. Another benefit is a buyer can show they have the funds by showing the stablecoins in their wallet.

For directors in banking and payments companies, this is already a strategic topic because the business model is being disrupted. Large banks, such as JP Morgan, have launched their own stablecoins for corporate clients to transfer USD or euros instantly within JPMorgan’s ecosystem for treasury, trade and FX settlement. Some e-commerce sites and even brick and mortar shops in Asia and Latin America accept payments in stablecoins.  Smart contracts on blockchains settle in stablecoins. Another increasingly common use case is for moving collateral between counterparties.

The key consideration for non-banking and payments directors is whether stablecoins can fundamentally change the structure of their business. For example, does it make it viable to do business in countries with restricted currencies or does it allow the company to reduce its operating cost by making it easier to factor invoices or offset FX or commodity risk?

Stablecoins trade and move 24/7 and so may well have a strategic impact on how a company manages its treasuries. The global clearinghouse Depository Trust and Clearing Corporation (DTCC) now offers tokenized real-time collateral management to increase the mobility and velocity of global collateral.

Equally, the ability to hedge commodity price changes by integrating stablecoins into financial products offers companies a more flexible way of managing risk. For example, an airline might automatically and dynamically hedge fuel costs that are priced in USD when customers purchase tickets in multiple currencies such as euros or RMB.

There are many different uses for stablecoins and these can be daisy-chained together. An example would be invoice factoring, where balances can be netted off in stablecoins, cutting the frequency and size of on- and off-ramp transactions and significantly reducing cost and risk.

As this is a new topic, directors may wish to exercise closer oversight initially, even if it is not leading to a change in strategy. There is a tremendous amount to be learned from these early exercises.

At a high level, there are three main considerations board members need to be aware of: level of trust, speed and cost.

In turn, these three variables depend on which stablecoin is being used, who is issuing the coin, which legal system it operates under, and how and where it is collateralized. 

All stablecoins are not created equal. Some stablecoins, such as USDC, are hard-pegged to the dollar and fully collateralized by cash and U.S. treasuries, whereas other stablecoins may be backed by commodities such as gold and real estate or even other cryptocurrencies.

A key consideration is custody and security. Custodians (traditional banks, specialized crypto custodians or regulated crypto exchanges) look after the private keys that allow access to the stablecoins. Funds are irretrievably lost if the key is lost or stolen, so the choice of custodian is very important, and there are associated risk topics over technology and insurance decisions, such as whether to spread the collateral across multiple custodians, multiple wallets and multiple stablecoins. Equally, the board needs to weigh the risk and cost of insuring the collateral against key loss or theft.

Another aspect is the on ramp and off ramp to move between stablecoins and fiat currencies. For stablecoins to be used successfully, there needs to be reliable on- and off-ramps in the countries the company operates in. Directors need to satisfy themselves that management has performed sufficient due diligence on the exchanges they are working with, covering areas such as whether they have segregated funds, insurance, levels of liquidity and pricing.

Stablecoins are no longer an idea in a science fiction movie. In 2024, stablecoins facilitated transfers totaling $27.6 trillion, surpassing the combined volume of Visa and Mastercard, and a recent report by Citi published in April 2025 estimated that stablecoins in issue could rise to a base case of $1.6 trillion by 2030, with a range of $0.5-$3.7 trillion. Whether it is a strategic imperative or a potential tactical competitive advantage, directors must understand the context, keep abreast of developments, be able to challenge management and exercise oversight in the era of stablecoins.