Where you can or can't issue a regulatory compliant stablecoin from?

Four major economies have passed or are in the process of passing stablecoin legislations, including:

• US - GENIUS Act

• EU - MiCAR

• UK - FCA framework

• Hong Kong - Stablecoin Ordinance

At first glance, these regimes share common pillars: full reserve backing, high-quality liquidity requirements, and redemption guarantees. But dig deeper, and differences emerge, especially in how they treat foreign issuers and non-local currency stablecoins.

These differences carry major implications for stablecoin issuers, who have long been waiting for regulatory clarity to scale across borders.

A special thanks to Mike Ringer, Partner in CMS UK’s Financial Services Group, for his invaluable insights on the regulatory treatment of foreign issuers and currencies across these key jurisdictions.

In this Weekly Research, we will look at how each of the four jurisdictions:

• Treat foreign issuers of local currency stablecoins

• Treat foreign issuers of foreign currency stablecoins

• Rules around interest-bearing stablecoins

Let’s dive in.

US (GENIUS Act)

The Genius Act passed the US Senate in a historical 68-30 bipartisan vote last week and now awaits a House vote before landing on President Trump’s desk for final approval in August.

As  Mike Ringer, Partner in CMS UK’s Financial Services Group, noted “the White House’s original Executive Order, a key motivation for the GENIUS Act, aims to protect and promote the sovereignty of the United States dollar”.

To promote the global ubiquity of the US dollar, the bill allows foreign issuers of USD stablecoins to participate in the US if the issuer's regulatory framework is certified as equivalent by the U.S. Treasury and they commit to compliance with US legal requirements. 

In global trade today, USD makes up 48.68% of the total trade volume. By contrast, in stablecoin, USD makes up 100% of the market for all intents and purposes. Perhaps it is then no surprise that the bill doesn’t contain much text on foreign issuer of non-USD stablecoins usage in the US since that is a non-issue. 

An interesting side effect of the bill is its ability to provide the biggest USD stablecoin issuer Tether a path forward to enter the US market at scale under three conditions:

• Registering under the U.S. regulatory framework

• Meeting reserve and disclosure requirements

• Accepting U.S. regulatory oversight

Given the close relationship it has cultivated with the US Commerce Sec. Howard Lutnick and the lucrative valuation (150x+ P/E) US markets placed on its smaller rival Circle, Tether may finally make the improbable transformation from an offshore outsider into one of the largest USD stablecoin with a stamp of approval from the US government.

And if that were to happen, it would likely become one of the most important allies for the US government in the pursuit of global US dollar dominance in a digital age and an important new source of funding for the US government given that most of its reserves must be in US Treasuries.

European Union (MiCAR)

The EU was the first major economy to enact a stablecoin regulation framework. MiCAR came into force in 2024. Unlike the US, MiCAR does NOT allow foreign issuers of EUR stablecoin to operate in the EU and restricts non-EUR stablecoin usage in the EU.

In particular, MiCA Article 23(3) empowers the European Banking Authority (EBA) and national regulators to restrict or even prohibit asset-referenced tokens (ARTs) used as a means of exchange if they threaten monetary sovereignty, financial stability, or monetary policy.

The EBA is empowered to monitor daily transaction volumes. If a stablecoin’s usage exceeds thresholds such as €1 million in daily transactions or more than 1 million users, it may:

• Face enhanced supervision

• Be forced to wind down certain use cases

• Or be banned from use as a means of payment in the EU

The reason European authorities want to restrict the usage of non-EUR stablecoins is the erosion of EUR’s role within the bloc and their ability to influence monetary transmission mechanisms given USD stablecoin’s dominance in the market and clear traction in Europe.

Germany, France, Spain and the Netherlands are amongst the top 20 stablecoin markets in the world, one which is dominated by USD. See my previous research for a full breakdown of the world's largest stablecoin countries. 

Although most of this volume currently is concentrated in crypto exchange trading, the worst scenario for the ECB is seeing these volumes cross over into real-world payment use cases, because such use cases will signal that average consumers in the EU are using USD for everyday purchases.

UK (FCA framework)

The FCA stablecoin framework is under partial rollout. Stablecoin is recognized under the Financial Services and Markets Act 2023 (FSMA 2023) as a form of money for payments. 

But the BoE will lead the development of a separate regime for systemic stablecoins.

In contrast to the EU, the UK takes a more liberal approach to foreign issuers. Mike commented that “the UK only requires locally established issuers to be licensed and permitting foreign issuers to participate freely in UK stablecoin markets whatever currency of stablecoins they issue.”

The stance is specifically adopted to encourage foreign issuers of GBP stablecions as this would elevate GBP’s importance in global cross-border transactions. However, this cuts both ways: USD or EUR stablecoins could also gain a meaningful foothold in the UK market. 

While it seems the UK government does NOT have any monetary sovereignty concerns at the moment, the UK ranks 2nd in the world in terms of stablecoin usage volume behind the US, where 100% of the volume is in USD stablecoin.

As a fail safe mechanism against losing monetary sovereignty, Bank of England is tasked with drawing up a separate supervision regime for systemic stablecoins. The moment a non-GBP is deemed as systemic it may face additional scrutiny.

Hong Kong (Stablecoin Ordinance)

Hong Kong published the Stablecoin Ordinance in an effort to provide stablecoin market clarity in May 2025. The message is simple: if you are issuing a HKD stablecoin, no matter where you are based, you need to seek approval and licensing from the Hong Kong Monetary Authority.

However, if you are a foreign issuer of a non-HKD stablecoin, you need to be listed via a locally licensed exchange to offer trading pair capabilities. However, you are not allowed to be used in payment use cases unless you have explicit approval from the HKMA.

As I pointed out in my previous stablecoin GTM piece, Hong Kong is an important proxy for trillions of trade volumes flowing in and out of China with the world, making it a likely hotspot for USD, EUR, and potentially RMB-denominated stablecoins to gain traction in payments and settlements.

The Stablecoin Ordinance illustrates an interesting approach to the issue of monetary sovereignty amongst governments. While local currency issuers with licenses and domestic payment use cases are encouraged by regulatory frameworks, foreign currency stablecoins are treated with varying degree of caution, though trading use cases still enjoy a degree of flexibility when it comes to foreign issued foreign currency stablecoins. 

Expect this trend to continue but restrictions to intensify if local currency denominated stablecoins fail to gain traction while USD stablecoins proliferate - which is largely what has happened in the EU since MiCAR came into force in July 2024. See my EUR stablecoin market analysis.

Interest Payment on Stablecoins

Despite their differences in attitudes towards foreign issuers and currencies, all four nations are united in their restrictions on paying interest on stablecoins. The fear is that if stablecoins become a yield-bearing form of money, they may pose a threat to banks’ deposit funding source and ultimately our fractional reserve banking system.

But this is a hairy topic. And there are workarounds. For example, while the GENIUS Act bans yield-bearing USD stablecoins, Paypal and Circle pay “rewards” to holders of their stablecoins in certain cases. No interest, no problem. Let me “reward” you for holding my stablecoin. These rewards are seen as a customer acquisition cost. 

However, this may offer interesting opportunities to jurisdictions that allow interest payment to stablecoin holders or to tokenized money market fund products that offer enough instant liquidity to become the preferred payment option where the holders also earn a yield. After all, tokenized MMF’s 7,400% market growth since 2023 is a clear signal that there is plenty of demand for accessing US Treasury’s yield onchain in an easy manner.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.