Industry news:
— Another group of leading international banks said it was exploring the issuance of a 1:1 reserve-backed form of digital money, this time featuring BNP Paribas and Goldman Sachs.
— The Solana Foundation said it has partnered with a Korean blockchain infrastructure company to build a “compliance-ready” Korean won-pegged stablecoin.
Key graf: “Solana and Wavebridge will develop a tokenization engine to manage the issuance, verification, and compliance procedures for Korean won stablecoins.”
— Stripe officially opened the door for consumers to pay for AI subscriptions, SaaS tools, and creator content using stablecoins (via Cryptonews).
— Sony Bank filed for a crypto banking charter to issue stablecoins and custody services through its Connectia Trust subsidiary (via Decrypt).
— Citigroup is betting on tokenized deposits as CEO Jane Fraser tells investors the future is not stablecoins (via Coindesk).
Key graf: “While Citi will continue to support stablecoins — offering on/off ramps, custodial services and cash management for stablecoin providers — Fraser emphasized that they come with more operational friction.”
— Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho are collaborating to launch yen and dollar stablecoins to challenge USDT and USDC with 1 trillion of yen issuance planned over 3 years (via Crypto News).
Key graf: “The three megabanks, which collectively serve over 300,000 major business partners, have united specifically to drive stablecoin adoption across Japan. ‘The banks will build a structure for corporate clients to allow for stablecoins to be transferred between them along uniform standards, initially issuing a yen-pegged coin and potentially a dollar-pegged coin in the future,’ Nikkei reported.”
— French banking giant ODDO BHF said it is launching a euro-backed stablecoin called EUROD, designed to be a compliant digital version of the euro (via Coindesk).
— BlackRock said it is rolling out a revamped money market fund designed to comply with the GENIUS Act as the world’s largest asset manager moves to take advantage of stablecoin trends (via The Block).
— Anchorage Digital, the first federally chartered crypto bank in the United States, will issue Ethena Labs’ USDtb token onshore as the first stablecoin (via The Block).
Stats and outlooks:
— Visa said stablecoins could reshape the $40 trillion credit market, despite IMF warnings about rising financial risks (via Decrypt).
Key graf: “Visa argues that stablecoin-based lending could open the door for traditional institutions to bring parts of the $40 trillion global credit market onto programmable, blockchain-based rails.”
Premiums and discounts:
— Koreans have been flocking to stablecoins, which have traded at a significant premium the past week on local exchanges as a result, reports CCN.
Key graf: “As locals look to hedge against further devaluation, stablecoin prices have jumped on South Korean crypto exchanges. For instance, on Tuesday, USDT was trading more than six percent above its dollar value on Bithumb and Upbit, the country’s largest exchanges. The markup is extreme even by Korean standards. Due to strict capital controls which restrict efficient arbitrage, cryptocurrencies are often priced higher on South Korean exchanges. On Saturday, this price gap, known as the Kimchi Premium, surged to levels not seen since February.”
Cash Equivalence take: Stablecoin premiums and discounts are becoming important market signals in their own right
Compliance:
— Tether is being accused of working too closely with authorities, according to a new lawsuit (via CCN).
Key graf: “The plaintiff, Riverstone Consultancy, is seeking the release of $45 million USDT Tether allegedly frozen at the request of a Bulgarian police department. The suit accuses the defendant of a breach of fiduciary duty for failing to follow the correct legal process for such requests. According to the complaint, when Tether notified Riverstone of the wallet freeze, the stablecoin issuer failed to provide evidence that it had the legal right to do so. Instead, the plaintiff was directed to contact the Bulgarian police. Yet upon reaching out to the law enforcement department, Riverstone’s attorney was stonewalled, the company claims.”
— Cantor is also being accused of unfair valuations and conflicts in its capital raising ops for Tether.
Deep thoughts:
— Former ECB Vice President Vítor Constâncio had more thoughts about the digital euro and stablecoins on his personal Substack.
Key points: Constâncio argues the digital euro is not just a retail project, but also a wholesale restructuring of Target2 (which was already recently restructured). He highlights the Pontes and Appia initiative, which was announced formally by the ECB in July, noting it seeks to enable distributed ledger technology (DLT) transactions to be settled in euro using central bank money.
Key grafs: “Regarding retail CBDC for the general public, I have always believed that no compelling case could be made in favor of it in advanced economies. However, I have consistently recognized that, in the case of the euro, once the deep institutional commitment was made, it became almost impossible to halt the project. I also acknowledged that implementing it causes no harm. Contrary to the banks’ arguments in their opposition lobbying, there will be no risk of instability from a significant drop in bank deposits. First, because each CBDC account must maintain a low maximum amount at any given time — either the quoted €3000 or a lower amount to be determined — a point I expand on below. The limit also applies to merchants, who must therefore channel the majority of their cumulative sales revenue into regular deposits in the banking system. Second, because, for reasons I address later, I believe there will be a low demand for the digital euro (D-EUR) by the general public, which will reduce the extent of deposit substitution. This projected lack of demand, by the way, poses a reputational risk to the authorities, particularly if they publicly overstate their expectations for significant benefits from retail CBDC. Realism calls for caution in this matter.”
“Don’t be misled by the common term, ‘international reserve currency,’ and the fact that gold is replacing dollar assets on the balance sheets of several central banks. Official dollar reserves were significant after World War II, but the rise of the Eurodollar system in the 1960s/70s solved the problem of international liquidity through the shift to private international money. The dollar dominates the system of offshore deposits and loans, the global derivatives markets, the forex market, the repo market, and the invoicing and payments of trade and finance. These are the factors that uphold its hegemony, not its position on the balance sheets of Asian and emerging market central banks. A subject I will explore further in future posts.”
— Barry Eichengreen turns his attention to stablecoins and asks “will they preserve dollar dominance?” (via Project Syndicate).
Key graf: “This argument is based on a slew of assumptions that need to be unpacked. First, the notion that dollar stablecoins will be attractive for payments assumes that they will in fact be stable (here come those good questions again), and that other governments will allow free use of dollar stablecoins by their residents.”
Cash Equivalence take: Eichengreen is skeptical, noting that threatened jurisdictions are already adapting to either ban or compete by issuing their own stablecoins/digital currency. “Anyone who has encountered China’s Great Firewall knows that national authorities retain considerable power to limit their citizens’ digital transactions,” says Eichengreen.
But this completely misses the below-the-radar mechanisms being used to onboard citizens onto stablecoins or the bags of cash that keep arriving in Hong Kong for processing by money dealers. It also misses another critical point. The authorities themselves need access to stablecoins. [For more on that see our Blind Spot analysis] You can’t exactly compete with USD stablecoins by issuing local currency counterparts if what is actually being demanded is the dollar exposure itself. Awkward but true!
BREAKING NEWS: Speaking of the devil, just as we were about to publish, the FT dropped news that Chinese tech giants had paused plans to issue stablecoins in Hong Kong, after Beijing raised concerns about the rise of currencies controlled by the private sector.
Key graph: “PBoC officials advised against participating in the initial stablecoin rollout over concerns about allowing tech groups and brokerages to issue any type of currency, five people said.”
— Economists Tyler Cowen and George Selgin discussed whether stablecoins should be allowed to pay interest in a podcast.
Selgin’s key quote: “I think that, of course, stablecoins, if they succeed at all, are going to be competing to some extent with banks, and some banks are going to lose to that extent. That in itself can’t be an argument for imposing any kind of restrictions on stablecoins. It has to be the case that the damage banks suffer somehow is going to make us worse off, even though people are benefiting from the stablecoins instead. If we can envision, just for the sake of argument, a stablecoin industry that gives us all everything we want that we used to get from banks, so we do dispense with banks altogether. Well, so what? It’s like replacing horses and buggies with automobiles. So, there has to be some kind of third-party effect or something that’s appealed to before we can say, “Oh, well, we better not let them do this.” I haven’t seen very good arguments about such consequences.”
— Ex ECB man Spyros Andreopoulos argued that while stablecoin growth may loosen US fiscal constraints and boost the dollar’s dominant currency status in the near term, stablecoins will ultimately just add a layer of complexity to the discussion about the quality of the country’s institutions (via his Substack).
SNAFU:
— Ethena Labs founder Guy Young praised Binance’s rapid $283 million compensation to users affected by a USDe price glitch on October 10, 2025, framing it as a trust-building step amid a $19 billion market liquidation event.
Key graf: “To address any concerns on the relationship between Ethena and Binance, our partnership remains strong and is not impacted by the events over the weekend. We will continue supporting each others products.”
— PayPal’s crypto partner minted a whopping $300 trillion worth of stablecoins in ‘technical error’, via CNBC.
— Market structure expert, Craig Pirrong, isn’t convinced that USDe’s undoing was a mere reference rate issue.
Summary of argument: Pirrong contends that attributing the crash simply to one exchange using a “wrong” price is superficial and misses the deeper structural flaws of the crypto market. He argues that the real issue is tight coupling, high-frequency marking-to-market, automatic liquidation triggers, and fragmented trading venues: “This fragmentation increases the number of connections … the number of possible paths by which a destabilizing shock can spread.” He writes that even if the particular sequence (e.g., a less-liquid price feed) were eliminated, many other sequences remain because the system is inherently fragile: “What happened … was a ‘normal accident.’ … many, many many other such sequences will remain.” In other words, the ‘“wrong reference price” explanation underplays the recurring vulnerability of the system itself.
Statecraft news:
— CMB International, a subsidiary of China Merchants Bank, launched its $3.8B Money Market Fund on BNB Chain, represented by the CMBMINT and CMBIMINT tokens.
Liquidity watch:
— Dollar liquidity is tight, which is having spillover effects for gold, crypto, and stablecoin markets (over at the Blind Spot $).
Summary: We draw a historical parallel between Poland’s 1980s hard-currency controls and China’s current financial strains — suggesting that, beneath the surface, Chinese demand for gold and silver may reflect a growing appetite for dollar substitutes such as stablecoins as covert stores of value and trade instruments. This dynamic, combined with U.S. debates over how to price and fund intraday liquidity, hints at a future where crypto and stablecoins could become tools for managing systemic funding stress — effectively turning them into “liquidity of first resort” assets in a tightening dollar environment.
We also highlight that if policymakers like Michelle Bowman succeed in moving toward a scarce reserves regime — where banks must actively price short-term funding stress rather than rely on excess reserves — the system may need new, market-based ways to source and price real-time liquidity. That could open the door for crypto and stablecoin markets to play a direct role in intraday liquidity provision, using instruments like perpetual futures or tokenized dollar liquidity pools to dynamically price funding costs.
Analysts:
— Former Credit Suisse man, Brent Johnson, now at his own shop, Santiago Capital, has an upcoming deep dive into stablecoins. Cash Equivalence got the preview.
Summary: Johnson’s framing is similar to our own: U.S. dollar–backed stablecoins are not just a financial innovation but a strategic instrument of geopolitical power. The paper describes stablecoins as tools that extend American monetary dominance through software rather than force, turning the dollar into a programmable empire.
Counterintuitively, while many view crypto as a decentralizing or anti-establishment force, Johnson sees stablecoins as actually deepening centralization by embedding U.S. monetary sovereignty into global digital networks. The outcome will be that they will fuse private innovation with state power, transforming the dollar from a currency into an infrastructure of influence. [Cash Equivalence has previously dubbed this effect “exorbitant privilege as a service”.]
Johnson also notes that, unlike sanctions or military force, stablecoins spread U.S. power by voluntary adoption. Citizens of unstable economies naturally prefer a digital dollar they can trust. Each transaction in a stablecoin is one less in a local currency — gradually eroding foreign monetary sovereignty.
Key graf: “The Genius Act was Washington’s preemptive move to prevent a second Eurodollar problem from developing in cyberspace. The Act’s architecture speaks to this intent. It authorizes both the Federal Reserve and state banking supervisors to oversee stablecoin issuers, but requires that all reserves be held in the safest, most liquid U.S. instruments — cash and Treasury bills.
By doing so, it effectively turns every regulated stablecoin into a short-term claim on the U.S. fiscal apparatus. Each token becomes not just a digital convenience but a small extension of the sovereign balance sheet. The liquidity that backs these tokens flows directly into Treasury funding, tightening the loop between government debt issuance and private digital demand.”
Central Bankers:
— The Fed’s Michael Barr warned that because stablecoins are not backed by deposit insurance, and because issuers do not have access to central bank liquidity, the quality and liquidity of their reserve assets introduce run risk, even if high quality. The speech can be found here.
Summary: Barr strikes a cautious and generally negative-to-wary tone toward stablecoins as currently structured, while showing measured optimism about blockchain’s underlying technology. He acknowledged the “potential efficiency gains” from distributed ledgers but consistently stressed that stablecoins replicate the historic vulnerabilities of private money — notably run risk, opacity, and regulatory gaps. His emphasis is on containment rather than promotion: stablecoins may coexist with the banking system only under tight oversight. Barr warns that unchecked issuance could “undermine financial stability” and “blur the separation between banking and commerce.” He prefers maintaining a two-tier model with tokenized bank deposits.
— ECB exec member Piero Cipollone published slides he presented about stablecoins at the recent Euro50 Group meeting. Key slide:
— Pierre Gramegna, managing director of the European Stability Mechanism (ESM), said Europe must accelerate its efforts to issue domestic stablecoins and strengthen its digital financial sovereignty (via Cryptonews).
— The BoE will graciously allow some systemic stablecoin issuers to receive some return on their backing assets, deputy governor Sarah Breeden confirmed in a speech.
Key graf: “In addition, our consultation will set out that the Bank is considering putting in place a liquidity facility to help backstop solvent systemic stablecoin issuers’ ability to monetise those assets if needed and so to support meeting redemption requests. As a consequence, and in contrast to other jurisdictions where stablecoins have to rely in effect on their competitors (commercial banks) to provide them a bank account, in the UK’s regime the Bank of England will play the role of banker to systemic issuers. That avoids the issues we’re already starting to see overseas of a lack of availability of banking services for stablecoin issuers.”
Regulation:
— Politico reported that the push by the banking industry to bar crypto exchanges from paying yield to users who hold stablecoins via “rewards” is creating uncertainty among some Republicans on the Banking Committee ($)
— The Financial Stability Board described regulation of stablecoins as “lagging” in its cryptocurrency review, which can be found here.
Cash Equivalence take: It’s a bulky read, but probably worth it. We think the key takeaway is that the FSB is guiding regulators that there are limitations to applying existing crypto regulatory frameworks to stablecoins, unless they are materially adjusted. This sounds an awful lot like a message to the EU, which is struggling to apply the pre-existing MICA rulebook to the newly arising oddities of stablecoins, notably those related to fungibility.
Key graf: “The limited number of licenses and authorizations granted, despite the growing size of and new entrants into the stablecoin market, underscores a lag between regulatory implementation and market developments and benefits the dominant position of incumbents operating from jurisdictions that have not fully implemented the GSC recommendations. This fragmented approach not only creates risks of regulatory arbitrage but also undermines the stability and potential benefits of stablecoins as a viable financial product. Achieving alignment with the GSC recommendations is critical to safeguarding financial stability and fostering trust in this rapidly evolving market.”
Regarding the monetary sovereignty threat:
Key grafs: “Furthermore, foreign currency-pegged stablecoins present unique challenges, as they can facilitate cross-border payments outside regulated banking channels, undermining compliance with capital flow measures and potentially destabilizing monetary systems. Ensuring that stablecoin activity occurs within the regulatory perimeter is critical to maintaining oversight, enforcing capital controls, and safeguarding financial stability. To address these challenges, jurisdictions are employing a variety of approaches. Brazil is proactively integrating crypto-asset oversight into its FX framework by requiring crypto asset-service providers (CASPs) to report customer transactions to the Central Bank of Brazil, enhancing transparency and regulatory reach.”
Regarding stablecoin entanglement with tradfi:
“While stablecoins are not yet widely used to facilitate real economic activities such as payments, stablecoin issuers are becoming significant players in traditional financial markets via their substantial reserve holdings, which have become comparable to those from foreign governments or large money market funds. This concentration of holdings among a few stablecoin issuers, particularly at the very short end of the yield curve, raises concerns about potential market disruptions during periods of stress.
“Stablecoin issuers may be forced to liquidate reserves rapidly to meet redemption requests. Continued growth in stablecoins requires close monitoring of developments and robust regulatory safeguards, especially given their growing use cases (particularly in emerging market and developing economies (EMDEs)), potential for bank disintermediation via deposit displacement, and risks that may arise from certain business models that issue stablecoins across multiple jurisdictions and therefore may need to manage reserves across jurisdictional borders.”
Status table:
