Stablecoins for Traditional Businesses: Feasible or Not?

One of the most significant advantages of stablecoins lies in their ability to facilitate the efficient, low-cost transfer of capital across borders and their near-instant settlement capabilities. Unlike traditional banking systems, which often involve multiple intermediaries, high fees, and delays—especially for international transactions—stablecoins enable users to move funds globally within minutes, 24/7, using blockchain infrastructure.

However, the extent to which these benefits can be realized largely depends on each country’s regulatory stance. In regions with supportive or clearly defined stablecoin frameworks, such as parts of the EU under MiCA or certain jurisdictions in Asia, adoption is more seamless and usage is growing. Conversely, in countries with restrictive or uncertain regulations—like the U.S., where ongoing debates around stablecoin classification and issuer requirements persist—the ability to harness these advantages is often limited or delayed. As a result, while the technology offers clear global utility, its effectiveness is still shaped by local compliance and legal clarity.

In response to these regulatory developments, some governments have begun categorizing stablecoins based on their intended use. This has led to growing recognition of two primary types that are gaining acceptance from both regulators and the broader market: Payment Stablecoins, used for everyday transactions and value transfer, and Yield Stablecoins, which offer users a stable asset with embedded return-generating mechanisms.

Payment stablecoins

Payment Stablecoins are designed primarily to serve as a medium of exchange or a store of value, offering price stability and fast, low-cost transfers. They are typically pegged 1:1 to a fiat currency like the U.S. dollar and backed by high-quality liquid assets (e.g., cash or short-term Treasuries). Their main function is to facilitate transactions, remittances, and settlements across blockchain networks without the volatility associated with other cryptocurrencies. Examples include USDC, USDT, and PYUSD. Payment stablecoins usually do not generate yield or interest, which helps them avoid being classified as securities under many regulatory regimes.

When examining how major economies regulate payment stablecoins, it becomes clear that global governments are beginning to take distinctly structured approaches to their oversight. In the United States, regulatory efforts have taken form through legislative proposals such as the GENIUS Act, officially introduced on March 18, 2025. This act offers a formal definition of Payment Stablecoins (PSCs) and outlines the conditions under which they can be issued and operated.

According to the GENIUS Act, a Payment Stablecoin is a type of digital asset specifically designed for use as a means of payment or settlement. To qualify as a PSC, the asset must meet a series of criteria:

• (A) The issuer must be obligated to redeem the stablecoin for a fixed monetary amount (excluding redemption into other digital assets), maintain or represent the intent to maintain a stable value pegged to fiat currency, and comply with all regulatory authorization requirements established under the act.
• (B) The asset must not qualify as a national currency, a bank deposit (including those facilitated by distributed ledger technologies), an interest-bearing or yield-generating instrument, or a security under core U.S. financial laws—namely the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. However, certain debt instruments or financial contracts may still fall under the PSC classification if they meet the specific standards listed above.

The responsibility for issuing PSCs is limited to entities defined as Payment Stablecoin Issuers (PSCIs). Under the GENIUS Act and associated proposals currently under congressional review, the issuance of payment stablecoins would be restricted to two types of entities:

1. Nonbank Entities (NBEs) — companies that are not insured depository institutions (IDIs) or their subsidiaries. These entities may be part of a bank holding company or operate independently.
2. Subsidiaries of IDIs — while these can issue tokenized deposits, they are prohibited from issuing PSCs under the current draft legislation.

These regulatory boundaries are intended to provide a robust compliance framework but also place significant restrictions, especially for traditional banks and financial institutions that might wish to enter the stablecoin market.

In contrast, the European Union has taken a more unified and broad-based approach to stablecoin regulation through the Markets in Crypto-Assets Regulation (MiCA), which began to take effect in June 2024. MiCA is notable for being the first regulatory framework in the EU that applies uniformly to crypto assets across all member states, offering much-needed legal clarity for industry participants.

Under MiCA, algorithmic stablecoins are essentially banned, as they do not qualify as “asset-referenced tokens” and are therefore deemed too volatile and unregulated to meet the EU’s financial stability standards. Instead, MiCA focuses on fiat-backed stablecoins, requiring that these tokens be fully backed by highly liquid assets held at a 1:1 ratio to the issued supply. This is aimed at protecting the integrity of the euro and other national currencies, while ensuring that stablecoin issuers are not creating systemic financial risks.

Entities that plan to issue stablecoins under MiCA must do so in the form of either:

• E-Money Tokens (EMTs) — stablecoins pegged directly to a single fiat currency, or
• Asset-Referenced Tokens (ARTs) — stablecoins backed by a combination of assets, which could include multiple fiat currencies, commodities, or cryptocurrencies.

Regardless of the category, issuers are required to obtain formal authorization from relevant regulatory authorities before launching their tokens in the EU market. Although MiCA does not explicitly use the term “stablecoin,” both EMTs and ARTs fall under that functional umbrella and are subject to strict operational, reporting, and compliance obligations.

Due to this, Tether’s USDT has not been outright banned in the European Union under the Markets in Crypto-Assets Regulation (MiCA), but its availability and use have been significantly restricted. MiCA, which came into effect on December 30, 2024, mandates that stablecoin issuers must obtain authorization to operate within the EU. As of now, Tether has not secured such authorization, leading to delistings and service suspensions by major exchanges operating in the EU.

For instance, exchanges like Bitstamp, Crypto.com, and Kraken have announced plans to delist USDT from their platforms for European clients. Bitstamp ceased trading USDT on January 31, 2025, while Crypto.com and Kraken are phasing out USDT services throughout the first quarter of 2025 . These actions are in response to MiCA’s requirements for stablecoin issuers to be authorized within the EU.

Despite these restrictions, USDT remains available for custody on some platforms, and users can still hold USDT in their wallets. However, the lack of authorization means that USDT cannot be used for trading or other services on many EU-based exchanges.

In contrast, other stablecoins like Circle’s USDC have obtained the necessary licenses to operate within the EU. For example, Circle secured an Electronic Money Institution license in France, allowing it to offer USDC services across all EU member states.

Both the U.S. and the EU are moving toward clearer regulatory environments for stablecoins, but they differ in scope and execution. The U.S. focuses on restricting who can issue payment stablecoins and how they must be structured to avoid classification as securities, while the EU emphasizes strong backing requirements and uniform licensing across its member states. These differing approaches reflect each region’s priorities—whether it’s financial innovation, systemic risk reduction, or preserving monetary sovereignty—and will ultimately shape how stablecoins evolve globally.

Yield Stablecoins

In contrast, Yield Stablecoins represent a more recent development designed not just to maintain a stable value, but also to provide passive income to holders through integrated yield mechanisms. These tokens are often linked to DeFi strategies like staking, liquidity provision, or delta-neutral strategies, which generate returns while maintaining price stability. A key example is Ethena’s USDe, which uses a synthetic yield model supported by derivatives markets. Due to their potential for generating returns, these stablecoins may face more stringent regulatory oversight, as they could be classified as investment products or securities depending on the regulatory environment. Another notable example is Pendle’s PT and YT stablecoins, which enable users to enhance their yield strategies further while reducing the risk of losing the original collateral.

Key Characteristics of Yield Stablecoins

1. Stable Value Peg

   Like payment stablecoins, yield stablecoins aim to maintain a 1:1 peg to a stable asset (typically USD). However, how they maintain this peg can vary—some use collateral, others rely on algorithmic mechanisms, and some blend multiple methods.

2. Built-In Yield Mechanism

   Yield stablecoins generate returns for holders via:

   • DeFi strategies (e.g., staking, lending, liquidity provision),
   • Off-chain yield sources like Treasury bills or derivatives,
   • Synthetic strategies that simulate yield without holding the underlying asset.

3. User Benefits

   • Passive income without needing to lock tokens in separate yield protocols,
   • Stable value for risk management,
   • Suitable for users who want both capital preservation and yield exposure.

Differences between Payment stablecoins and Yield stablecoins