The New Stablecoin Map: A Quiet Redesign of Money

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Legal & Compliance	Click to view sections → Europe's Model — MiCA compliance, EURC regulation, supervised scaling The Pound — BoE consultation, £20,000 limits, 60% gilt backing Latin America — Brazil FX reclassification, VASP licensing, Drex coexistence Where This Leaves Us — Regulatory divergence implications
Corporate Treasury & Finance	Click to view sections → The Dollar Block — USDT/USDC scale, concentration risk, offshore asymmetry USDe's November 2025 Crisis — Yield-dependent stability breakdown, looping mechanics Japan — JPYC, GYEN, Progmat Coin under Payment Services Act Where This Leaves Us — Risk assessment across stablecoin categories
Banking & Risk Management	Click to view sections → The Dollar Block — Systemic concentration, Treasury holdings by issuers USDe's November 2025 Crisis — Funding rate sensitivity, liquidity illusion The Pound — Digital Securities Sandbox, wholesale settlement exemptions Latin America — Brazil's consolidation phase, institutional vs informal operators
Family Offices & Allocators	Click to view sections → The Dollar Block — USDC vs USDT trust models, MiCA compliance advantage USDe's November 2025 Crisis — Why peg stability isn't the same as product viability Japan — Megabank-backed stablecoins, conservative institutional play Where This Leaves Us — Choosing which structures to trust
Fintech & Infrastructure	Click to view sections → USDe's November 2025 Crisis — Delta-neutral mechanics, looping strategies, systemic vulnerabilities Europe's Model — SEPA Instant, why tokenization solves different problems in EU China and the Yuan — AnchorX Kazakhstan pilot, Belt and Road positioning Where This Leaves Us — Building for fragmented monetary systems
Policy & Regulatory Analysis	Click to view sections → Europe's Model — MiCA implementation, regulated before scaled philosophy Japan — Payment Services Act framework, FSA oversight model The Pound — BoE/FCA coordination, 18-24 month lag behind MiCA China and the Yuan — Offshore experiments, onshore restraint, currency policy via stablecoins Latin America — Brazil BCB resolutions, regulatory formalization vs restriction

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Stablecoins stopped being a crypto curiosity some time ago. Most commentary hasn't caught up. They now sit underneath a growing amount of global liquidityThe ease with which an asset can be bought or sold without affecting its price and payments infrastructure, not as experiments but as working components. The surface still looks dollar-dominated. Underneath, the system is splitting into regional versions of "digital money," each shaped by its own politics, economics, and social taste.

It looks less like one global system and more like a set of parallel monetary pilots. They all use the word "stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold," but the underlying assumptions are different. At some point, regulation will have to reconcile these models; otherwise the gaps become friction points rather than progress.

This isn't collapse and it isn't revolution. It's divergence. Slow and deliberate in some places, accidental in others.

The Dollar Block: Scale, Concentration, and the First Signs of Strain

The dollar remains the centre of gravity, and stablecoins are no exception. Around 99% of global stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold value still lives in the USD orbit. The two anchors are familiar:

USDTThe largest stablecoin by market cap, pegged 1:1 to the US Dollar and issued by Tether Limited sits at roughly 184 billion dollars, trading across dozens of networks. Its attestations have improved, but the operating model still relies heavily on offshore structures and selective transparency. The scale is undeniable, the opacity equally so.

USDCA fully-reserved stablecoin pegged 1:1 to the US Dollar, issued by Circle and backed by regulated financial institutions follows with about 73 billion dollars, fully backed by cash and short-term Treasuries held in supervised institutions. It now has the advantage of MiCA complianceMeeting regulatory requirements under the EU's Markets in Crypto-Assets regulation in Europe, making it the only major player with a regulatory seal recognised on both sides of the Atlantic.

Below these two is a second ring of models:

• USDe, synthetic and hedged through derivatives, offering a yield shaped by funding rates and staking rewards.
• DAIA decentralized, algorithmic stablecoin pegged to the US Dollar and backed by crypto collateral through the MakerDAO protocol and similar DeFiFinancial systems built on blockchain that operate without intermediaries like banks models, technically decentralised yet increasingly reliant on the very fiatTraditional government-issued currency, such as USD, EUR, or NIS stablecoins they were meant to circumvent.

Three themes define the dollar block:

1. Scale: it's where true liquidity lives.
2. Asymmetry: some issuers drift toward banking-grade supervision; others remain structurally offshore.
3. Concentration: a handful of issuers hold levels of US government debt large enough to matter.

It's a system that works, but it carries its own form of concentration risk. The question isn't whether the dollar remains central. It's how supervised that centrality becomes, and what happens the next time a major issuer faces a liquidityThe ease with which an asset can be bought or sold without affecting its price breakdown rather than a technical hiccup.

USDe's November 2025 Crisis: When Yield-Dependent Stability Breaks

Ethena USDe's collapse from $14.8 billion to $7.6 billion TVLTotal assets deposited in DeFi protocols in November 2025 wasn't a market correction, it was a structural breakdown exposing fundamental flaws in yield-dependent stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold models.

The Mechanism and Its Hidden Fragility

USDe operates through delta-neutral positioning: holding long spot crypto positions while shorting perpetual futures on the same assets. The yield comes from funding rate differentials, payments flowing from long to short futures holders. During Q3 2025's bull market, annualized funding rates hit 8.37%, enabling double-digit yields.

The critical vulnerability: yield depends entirely on market sentiment, not stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold utility.

The Breaking Point

In November 2025, funding rates compressed to approximately 5.1% - a 40% decline from September. This alone wasn't fatal. The crisis triggered when this yield fell below USDCA fully-reserved stablecoin pegged 1:1 to the US Dollar, issued by Circle and backed by regulated financial institutions borrowing costs on Aave (approximately 5.4%).

This 30-basis-point inversion destroyed USDe's economic model. The "free carry trade" became negative carry overnight.

The Amplification: Looping's Double Edge and Systemic Risks Exposed

USDe's growth had been engineered through "looping" - staking USDe as collateral, borrowing USDCA fully-reserved stablecoin pegged 1:1 to the US Dollar, issued by Circle and backed by regulated financial institutions against it, buying more USDe, and repeating to achieve 10x leverage or higher.

At double-digit yields, this was extraordinarily profitable. When yields inverted, the same positions generated immediate losses. Margin calls triggered forced liquidations, creating a death spiral: selling pressure depressed collateral values, triggering more margin calls, accelerating outflows.

The peg held throughout - USDe maintained $1.00 because it remained over-collateralized. But peg stability proved irrelevant when the demand model itself collapsed.

The collapse revealed several vulnerabilities:

Interest rate sensitivity: USDe demand inverts when borrowing costs exceed yields, making it vulnerable to central bank policy and money market dynamics.

Funding rate cyclicality: Perpetual futures funding rates spike during bull runs and compress during consolidations. A stablecoin whose yield swings from 12% to 5% in six weeks isn't stable, it's a leveraged sentiment bet.

Liquidity illusion: The $14.8 billion TVL looked substantial, but most was locked in leverage positions. "Real" liquidity - users willing to hold without leverage - proved far smaller.

The Fundamental Distinction

USDCA fully-reserved stablecoin pegged 1:1 to the US Dollar, issued by Circle and backed by regulated financial institutions and USDTThe largest stablecoin by market cap, pegged 1:1 to the US Dollar and issued by Tether Limited are held for utility: cross-border transfers, DEXA platform where users can buy, sell, or trade cryptocurrencies trading, hedging, collateral. Demand is price-inelastic - even zero yields wouldn't eliminate their functional value.

USDe is held almost exclusively for yield. TransactionA transfer of value or data recorded on a blockchain, verified by network participants, and permanently added to the distributed ledger analysis suggests 90%+ of activity occurred within looping strategies. When the yield/borrow spread inverted, the reason for holding evaporated instantly.

The Existential Lesson

This brings us to the deeper point: USDe's failure isn't mechanical, it's existential.

The technology worked. The peg held. The delta-neutral hedging performed exactly as designed. Redemptions processed at $1.00 throughout the crisis. As a proof of concept, USDe succeeded brilliantly.

But half the capital left anyway.

This exposes a category error in how we evaluate stablecoins. We've obsessed over peg mechanisms - will it holdA misspelling of 'hold,' used to mean holding onto cryptocurrency for long-term gains $1.00? - when the more fundamental question is: why would anyone hold this regardless of yield?

USDCA fully-reserved stablecoin pegged 1:1 to the US Dollar, issued by Circle and backed by regulated financial institutions answers that easily: payments, trading, collateral, cross-border transfers. Yield is incidental. USDe never had a compelling answer beyond "high returns." When returns normalized, the product had nothing left to offer.

“

"It's like building a perfectly functioning seatbelt: rigorously tested, mechanically flawless, but discovering that nobody actually wants to be in a car crash. The seatbelt works. The problem is that its entire value proposition depends on a condition nobody seeks out."

USDe works. The problem is that its value proposition depends on a market condition that's inherently transient. You can't build durable demand on a foundation that only exists during bull markets.

The peg held. The product failed. That distinction may be the most important lesson the stablecoin market has learned since Terra.

Europe's Model: Supervised, Sensible, Slow

Euro stablecoins are a fraction of the market - comfortably under one percent.

That isn't failure. It's slow implementation with intent.

The euro area solved the "slow payments" problem years ago. SEPA Instant lets anyone move euros across borders, at negligible cost, twenty-four hours a day. You don't need a tokenA digital asset built on an existing blockchain, often representing utility or value to fix a problem you don't have.

So the European model looks different:

• EURC: fully compliant under MiCA, backed 1:1 by euro deposits held in the EEA, supervised, audited, and technically straightforward.
• EURS: niche, limited liquidity.
• EURT: increasingly incompatible with MiCA and effectively fading out.

Europe regulates before it scales. Procedure and transparency are more important than speed. The predictable outcome is a category that's properly supervised, but not yet central to anything.

Will euro stablecoins grow? Yes, eventually, and largely around corporate use cases, settlement pilots, and tokenised assets. But they're unlikely to become a replacement rail. They're a convenience layer, nothing more.

Europe isn't trying to reinvent the euro. It's simply making sure anything that carries its name behaves like money, not marketing.

Japan: Tokenised Money Without the Drama

Japan approached stablecoins with none of the theatrics the rest of the world brought to the table. No offshore structures. No half-regulated issuers. No philosophical debates. Just law, and regulations.

Under the Payment Services Act, yen stablecoins are issued by regulated financial institutions, fully backed by domestic deposits and Japanese Government Bonds. The two live examples:

• JPYC: regulated, redeemable, backed by domestic institutions, and ambitious enough to target ten trillion yen in issuance.
• GYEN: issued by GMO Trust, with independent attestations and a conservative structure.
• Progmat Coin: the joint initiative by MUFG, SMBC, and Mizuho. A regulated, yen-pegged stablecoin backed by deposits held in trust at licensed Japanese banks. It's technically conservative but strategically important because Japan's three megabanks rarely move together unless the direction is settled.

Japan treats stablecoins as an extension of its banking system, not an experiment.

There are redemption rights, local supervision, local custody, and integration with existing payments infrastructure.

It's not exciting, but it's coherent, and it's one of the only models in the world where a stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold behaves like a proper part of the monetary system rather than a workaround.

The Pound: A Strong Currency With No Digital Form or a sleeping giant waking up?

Sterling should be a natural candidate for a serious stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold.

London is one of the world's financial capitals.

It dominates FX turnover. It has a deep institutional market and a mature regulatory culture. Yet there is no large-scale GBP stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold anywhere in circulation.

Instead, we have early-stage efforts:

• GBPA: a developing institutional model backed through a trust structure.
• An ongoing Bank of England consultation: pushing future issuers toward holding a majority of reserves in short-term UK government debt, with the rest placed in unremunerated central bank accounts.

To be fair, the Bank of England's (BoE) definitive consultation paper in November 2025, proposes one of the world's most sophisticated stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold frameworks.

Concrete "Systemic" Proposals: The BoE has moved beyond "theory" to specific, quantified rules for "systemic stablecoins":

Holding Limits: A proposed temporary limit of £20,000 for individuals and £10 million for business accounts is designed to prevent rapid flight from commercial bank deposits to stablecoins.

Backing Model Concessions: Responding to industry feedback, the BoE now allows issuers to hold up to 60% of reserves in short-term UK government debt, with only the remaining 40% required to be held in unremunerated central bank accounts (previously proposed as 100%). This change makes the business model for sterling stablecoins economically viable for the first time.

The Sandbox Engine: The UK is actively testing these models through the Digital Securities Sandbox (DSS) and the FCA's new "stablecoin cohort" launched in late 2025. Crucially, stablecoins used for wholesale settlement within the DSS are exempt from the strict holding limits, signaling a clear path for institutional adoption. Far from passive, the UK is engineering a bespoke environment for high-compliance institutional issuers.

But, it's still paperwork, and theory. The UK should be concerned that it is to slow and too passive moving on this. If the UK waits too long, it risks adopting standards written by someone else, the opposite of how London built its financial role in the first place. Compared to the EU's MiCAAn EU regulatory framework standardizing crypto rules for issuers and service providers (fully live by end of 2024/mid-2025), the UK is roughly 18-24 months behind in finalizing its "systemic" regime, but it will get there.

Sterling will eventually have a stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold framework. The question is whether it arrives as a UK export or as an imported requirement handed down from Brussels, Washington, Tokyo or Singapore.

China and the Yuan: Offshore Experiments, Onshore Restraint

China's relationship with stablecoins is, predictably, not straightforward.

Officially, crypto trading remains tightly constrained. Unofficially, experiments continue, not inside China, but just far enough outside to give Beijing optionality without loosening domestic controls.

The most visible example is the AnchorX yuan-linked stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold launched in Kazakhstan. It is not an accident it emerged there. Kazakhstan sits comfortably within Belt and Road networks, and it offers China a way to test a digital yuanChina's retail CBDC issued by People's Bank of China for domestic and international use presence in cross-border settlements without opening the capital account.

Onshore, the position remains conservative: tight supervision, e-CNYChina's retail CBDC issued by People's Bank of China for domestic and international use pilots, and a clear preference for state-managed digital money.

Offshore, the tone shifts. There is open discussion of yuan-backed stablecoins as part of a wider currency internationalisation strategy.

None of this resembles the US or European models.

China is not trying to build an open stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold ecosystem. It is using digital money where useful, containing it where risky, and placing test cases at the edges of its economic sphere. It is not improvisation; it is long-standing currency policy using a modern design.

Latin America: stablecoins as a survival tool, now facing a regulatory makeover

In Latin America, stablecoins have never been a lifestyle choice. They are a response to economic reality.

Brazil, Argentina, Venezuela - each with its own flavour of inflation, devaluation, and capital restrictions - turned to stablecoins because the local currencies stopped doing their job. But this year brought tectonic shifts with it.

Brazil, the region's anchor economy, has moved stablecoins into the same regulatory perimeter as foreign exchangeA platform where users can buy, sell, or trade cryptocurrencies. Not banned, but reclassified in a way that shuts the door on most issuers. Any operator touching stablecoins now needs a full VASPEntity providing services related to virtual assets, subject to AML regulations licence by early 2026 - a licence that looks and behaves more like a bank charter than a crypto registration. Unlicensed firms will simply have to exit.

This doesn't remove the economic need. It removes the informal layer that previously served it.

But this is not the full picture. A closer analysis of the Central Bank of Brazil's (BCB) November 2025 resolutions reveals a strategy of integration and consolidation rather than simple restriction.

• FX Reclassification as a Bridge, Not a Barrier: By reclassifying stablecoin transactions under foreign exchange (FX) rules (Resolutions 519, 520, and 521), Brazil is not banning these assets but actively formalizing them. This move grants stablecoins a legal status comparable to foreign currencies, allowing them to be used legitimately for cross-border settlement, a critical capability for Brazil's export-heavy economy.
• The "Consolidation" Phase: The requirement for Virtual Asset Service Providers (VASPs) to obtain authorization by February 2026 will indeed force out unregulated "informal" players, but it favors established financial institutions and professional exchanges. Market commentary from legal experts indicates this is viewed locally as a necessary "legitimization" step that will likely attract institutional capital rather than repel it.
• Drex vs. Private Stablecoins: Brazil's "Drex" (digital real) project is designed to coexist with private stablecoins. Drex focuses on tokenized interbank settlement, while the new regulations clear the lane for private stablecoins to serve retail and corporate payment needs, provided they adhere to the new segregation of assets and reporting standards.

Brazil's intention is clear: if stablecoins are going to sit inside its domestic financial system, they will do so under central bank supervision, with proper capital, governance, and redemption structures, not as offshore abstractions.

The rest of the region will feel the impact. Argentina and Venezuela will continue using stablecoins as escape valves, because they have no alternative. But the liquidityThe ease with which an asset can be bought or sold without affecting its price that flowed freely across exchanges and OTC desks will fragment. Some of it will retreat offshore. Some of it will institutionalise. And some of it will disappear because the compliance costs outweigh the benefit.

Latin America's stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold story isn't over. It's simply moving into a phase where economic necessity meets regulatory reality, and the gap between the two is where the friction will be.

Where This Leaves Us

Across all regions, three points stand out.

First, the market is not moving toward one design. It is drifting into several.

The US, Europe, Japan, the UK, China, and Latin America are each building what suits their politics, regulation, and domestic priorities. They share a name but not a purpose.

Second, "stablecoin risk" is not one category.

A synthetic hedged structure, a fully reserved bank-supervised tokenA digital asset built on an existing blockchain, often representing utility or value, a yen stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold under Japanese law, and a BRL token used in everyday transactionsA transfer of value or data recorded on a blockchain, verified by network participants, and permanently added to the distributed ledger are not comparable instruments. Treating them as such is the fastest route to misjudging exposure.

Third, the monetary system is being rebuilt in layers, without any formal announcement.

Some of these layers sit on balance sheets and inside regulated institutions. Others operate offshore or inside smart contractsSelf-executing code on a blockchain that automates transactions. The connections between them will determine whether this becomes a functional global network or a set of incompatible digital islands.

Professionals will eventually need to choose which structures they trust enough to integrate into their own systems.

That decision - not market capitalisation rankings - is where the real "stablecoinA cryptocurrency pegged to a stable asset, such as USD or gold war" takes place. Not in price feeds, but in licences, redemption frameworks, settlement rules, and the reliability of reserves.

This is the part most commentary misses, and it is the part that matters.