Stablecoins – Fundamentals

A stablecoin promises that one token is always worth one unit of a currency, one euro or one US dollar. Behind this promise there is no algorithm and no central bank, but as a rule an issuer with a reserve. How well the promise holds depends on that reserve and on who can redeem it on what terms. How the EU regulation MiCAR classifies stablecoins in law is described in MiCAR (EU). This article is about how they work economically and what a company notices of it.

A Promise with a Reserve behind It

The mechanism is simple. A client pays euros to the issuer, and the issuer gives it tokens of the same amount in return. If the client hands the tokens back, it receives its euros and the tokens are destroyed. The issuer invests the money paid in as a reserve. As long as the reserve is sufficient and redemption works, nobody has a reason to sell a token for less than one euro.

For a euro stablecoin issued in the EU as an e-money token (EMT), MiCAR lays down this mechanism. The issuer issues tokens only at par value and on receipt of funds. On request it must redeem them at any time and at par value, without a fee. Settlement is made in funds that are not themselves e-money. At least 30 per cent of the funds received sit in separate accounts at credit institutions. The rest is invested in secure, highly liquid financial instruments in the same currency.

Besides these stablecoins backed by money there are two other designs. Some are secured by other crypto-assets, others try to hold the price through incentives and algorithms alone. The Bank for International Settlements (BIS) counts both as part of the market in its Annual Economic Report 2025. According to the BIS, however, those backed by money account for by far the largest share. For a company's payments these are the ones that matter. In the EU, only an e-money token gives a statutory claim to redemption at par.

Why the Price Still Deviates from Par

The claim to redemption is held against the issuer. Stablecoins are mostly traded on a secondary market, though, at trading platforms and service providers. There a price forms that need not be exactly one euro. The BIS compares this with an exchange-traded fund whose price can deviate from the value of its portfolio. It has found substantial deviations from par in stablecoins of all designs.

The reason lies in how they are built. A stablecoin is a claim on a particular issuer, and there is no settlement through the central bank behind it. The BIS describes this as red, blue and white dollars. Anyone holding tokens from different issuers holds different claims, and their price depends on the creditworthiness of each issuer. A bank deposit is different, because payments between banks are settled at par in central bank money. What separates a tokenised deposit from a stablecoin is described in Tokenised Deposits.

The deviation becomes dangerous when doubts about the reserve arise. Many holders then want to redeem at once, and the issuer has to sell assets in order to pay. MiCAR's rules on the composition of the reserve are meant to keep exactly this case manageable. They cannot rule it out, because the bank accounts holding the reserve can fail too.

Who Earns from the Reserve

The reserve earns income, because a large part of it is held in short-term government securities. According to the BIS, the issuers of USDT (Tether) and USDC (Circle) now hold US Treasury bills on the scale of large countries. Their holdings match those of large money market funds. The holder of an e-money token gets none of this. MiCAR prohibits the issuer and any service provider from granting interest or interest-like benefits for the holding period. The income from the reserve therefore stays with the issuer, and its business model rests on that.

For a company, a balance in stablecoins is therefore an interest-free claim on an issuer, without deposit protection. This does not matter as long as tokens are held for hours or days. For larger amounts held over weeks, it becomes a question of cost and risk.

Who Shapes the Market

According to the BIS, the growth of the market is concentrated in two stablecoins, USDT from Tether and USDC from Circle. Both are denominated in US dollars. In the EU, the European Securities and Markets Authority (ESMA) keeps a register of issuers of e-money tokens. As of 30 September 2026 it lists 25 issuers. They include e-money institutions such as Circle through its French company and AllUnity from Germany, and credit institutions such as CACEIS and Oddo BHF. Tether is not in the register.

In the United States, the GENIUS Act has been law since July 2025, a federal statute specifically for stablecoins used as a means of payment. Who may issue them there and when the law takes effect is explained in USA – CLARITY Act & GENIUS Act.

A Euro Stablecoin in Payments

A maker of packaging machines receives a down payment of 400,000 euros from a customer in a euro stablecoin. The tokens arrive in a wallet that a crypto-asset service provider keeps for the company. The manufacturer wants to use them to pay two suppliers in three weeks, who also accept tokens. At the end of the month it has the rest redeemed into euros on its business account.

The treasury notices three things. First, the money arrives on any day of the week. The payments to the suppliers are confirmed on the blockchain within minutes. Second, every transfer incurs a network fee, for example in ether, which is not deducted from the stablecoin balance. Third, redemption runs through the service provider, not the issuer. Its charges and cut-off times are set in the contract, not in MiCAR.

Over those three weeks the manufacturer has no price risk against the euro as it would with bitcoin. It does carry the risk of the issuer and of the service provider, and it gives up interest. How the receipts are posted and matched to invoices is described in Posting, Valuation & Tax and Reconciliation & Payment Flows.

What the Treasury Wants to Know about the Issuer

From the CFO's point of view, a stablecoin is less a technical product than a debtor. Assessing it is like assessing a payment service provider or a bank. It comes down to five questions:

• Is the issuer in the ESMA register, and as what kind of institution is it authorised?
• What redemption conditions does its white paper set out, and can the company reach the issuer directly or only through a service provider?
• What does the reserve consist of, at which banks is it held, and how often is it reported on?
• On which blockchains does the token run, and which of them does the company's own service provider support?
• What amount may stay in tokens, and for how long, before it is redeemed?

The answers belong in a limit rule, as is usual for balances at banks. Then there are the risks outside the issuer. Who holds the keys to the wallet and who is liable if they are lost is described in Custody & Safekeeping. Which details must travel with transfers between service providers is set out in Cross-Cutting: Compliance & Reporting.

Par Value Depends on the Redemption Route

MiCAR gives every holder of an e-money token the right to redeem at par at any time. In a company's day-to-day business, however, the route usually runs through a service provider, and there its price applies. In calm times the two values are so close that nobody notices the difference. Under stress they separate, and then what counts is who can reach the issuer itself. For a mid-sized company, the par value of a stablecoin is thus a property of its redemption route, not of the token.