Stablecoin Regulation: Expert Insights

Introduction to Stablecoin Regulation

BlackRock's Nikhil Sharma has emphasized the importance of stablecoins preserving their value and being interchangeable with bank deposits and central-bank money. According to Sharma, stablecoins must provide recognizable claims and recourse across banks, and banking systems would need to accept stablecoins and convert them into deposit liabilities.

Central banks could provide the final settlement layer through fiat money or wholesale CBDCs. The U.S. has already enacted the GENIUS Act, which governs permitted payment stablecoin issuers. Sharma's comments addressed how privately issued stablecoins, commercial-bank deposits, and central-bank money could operate within one financial system.

The Singleness of Money

Sharma discussed the concept of the "singleness of money," which refers to the principle that different forms of the same currency remain interchangeable at face value. He explained that the form of payment may change, but users must understand the claim, backing, access conditions, and recourse attached to it.

For example, a user paying with a dollar stablecoin would need the recipient's bank to recognize the asset and convert it into a deposit liability without creating uncertainty over its value. Banks would also require a settlement system for payments moving between institutions, with central banks providing the final settlement layer.

Risks Associated with Different Forms of Cash

Sharma noted that investors can benefit from having several forms of digital cash, but each form carries its own economic exposure and redemption structure. He emphasized that the "singleness of money" is an imperative from a recourse, economic exposure, and risk standpoint.

A commercial-bank deposit represents a liability of the bank, while a stablecoin represents a claim structured by its issuer and governing terms. Central-bank money carries a direct claim on the monetary authority. Stablecoin users therefore depend on the issuer's reserves, custody arrangements, and ability to process redemptions.

Interoperability and Settlement

Sharma stressed that banking acceptance, conversion into deposits, and access to a final settlement mechanism must work together if stablecoins are to serve regulated financial markets. He explained that interoperability alone would not remove the differences between various forms of cash.

Speaking from a central-bank perspective, Philipp Müller of the Swiss National Bank said commercial banks could issue stablecoins if they chose to do so. However, central banks must provide banks with a safe payment method suited to their requirements, which could be wholesale CBDC or fiat money.

U.S. Policy and the Dollar System

The growth of dollar stablecoins has created a U.S. policy question, with most large stablecoins referencing the U.S. dollar and keeping substantial reserves in cash, Treasury bills, or similar liquid assets. The United States enacted the GENIUS Act in July 2025, creating a federal framework for payment stablecoins.

Under the law, only permitted issuers may issue payment stablecoins in the country, subject to reserve, disclosure, and regulatory requirements. Dollar-linked tokens can extend access to the currency outside conventional banking hours and across national borders, but their growth can also increase demand for the reserve assets issuers use to support redemptions.

• The European Central Bank's Isabel Schnabel has said that dollar-backed stablecoins could strengthen the dollar's international position as the sector approaches a market value of $300 billion.
• Euro-denominated stablecoins account for only a small share of the market, according to Schnabel's remarks.
• The same development has raised concerns in Europe about dependence on dollar payment products.

Tokenized Markets and Settlement Cash

Sharma said the infrastructure needed for stablecoins and tokenized deposits begins with bank acceptance before moving to interoperability between institutions and final settlement. He explained that the final stage would involve a settlement layer capable of completing obligations without disrupting existing banking systems.

Tokenized securities make the cash question more urgent because trading an asset on a blockchain does not guarantee that the payment side can settle on the same schedule. Markets may offer continuous transfers while banks, payment systems, and foreign-exchange services continue to observe limited operating hours.

A recent examination of the weekend dollar funding gap found that always-open tokenized markets can face liquidity pressure when conventional dollar rails are unavailable. Settlement may remain incomplete even after the asset side of a transaction moves on-chain.

Market Size and Institutional Capital

ARK Invest's Lorenzo Valente put the digital-asset market at about $3 trillion, with stablecoins accounting for roughly $300 billion and tokenized assets between $30 billion and $40 billion. Valente said crypto had primarily been a retail market during its first decade because institutions lacked scalable tools, privacy, and sufficient compliance controls.

He argued that the market had become large enough to draw more institutional capital as those gaps began to narrow. BlackRock's Sharma focused instead on how institutions could use different forms of regulated cash without losing a common settlement value.

Implications for India

The growth of stablecoins and tokenized assets has significant implications for India, where the Reserve Bank of India (RBI) has been exploring the use of central bank digital currencies (CBDCs). The RBI has announced plans to launch a digital rupee, which could potentially interact with stablecoins and other digital assets.

Indian regulators will need to consider the risks and benefits of stablecoins and develop a regulatory framework that balances innovation with financial stability. This may involve coordinating with international regulators to ensure that stablecoins are subject to consistent and robust oversight.

What to Watch Next

As the stablecoin market continues to evolve, several key developments will be worth watching. These include the implementation of the GENIUS Act in the United States, the launch of the digital euro, and the development of CBDCs in other countries.

Additionally, the growth of tokenized assets and the increasing use of blockchain technology in financial markets will require regulators to adapt and innovate. The ability of stablecoins to preserve value and interact with traditional financial systems will be critical to their success and the stability of the financial system as a whole.