Can Regulation Make Stablecoins More Like Money?

This chapter asks what it would take for a stablecoin to serve as a payment instrument without reproducing the weaknesses of an investment claim. The useful test is not whether a product carries a “stable” label, but whether its use case, reserves, redemption terms, liquidity support, governance and payment rail fit together. That test also clarifies when repairing current stablecoins is enough and when the better route is to bring programmable payments into a two-tier system anchored by tokenised central-bank money.

A money-like claim is a bundle of promises

A stablecoin designed for payments makes several promises at once. It promises that the unit will be understood, that the token can be transferred, that the recipient can accept it at par, and that the holder can redeem it when needed. It also promises—sometimes explicitly, sometimes by implication—that the issuer’s reserves, operational systems and governance will remain reliable under stress. Regulation is effective only when it makes those promises compatible rather than checking each one in isolation.

The first decision is the intended use. A money-like stablecoin aims to function as a means of payment and to preserve par redemption across relevant conditions. An investment-like stablecoin may instead offer exposure to a reference currency or reserve portfolio while allowing its market price to move, charging redemption fees or imposing gates. Both designs can have a legitimate use. The second is closer to a fund share or security and should be evaluated through disclosure, market conduct and investor protection. The first must meet a higher standard because a failure to pay at par can disrupt a chain of ordinary obligations.

Redemption and reserves must match

For a payment claim, par redemption is not a decorative feature. It is what connects the token’s stated unit to the monetary system in which users price goods and settle debts. The BIS Annual Economic Report 2026 reports that major jurisdictions generally converge on mandatory redemption at par for fiat-referenced stablecoins, while differing on timing and fee treatment. A right that is technically available but slow, costly or inaccessible in stress may not provide the same practical moneyness as a timely claim.

Reserves are the asset-side counterpart. Full coverage is necessary for a one-for-one promise, but coverage alone does not answer how quickly the assets can be mobilised, who controls them, whether they are segregated, or what happens if markets are under pressure. The report describes regulatory approaches that commonly require low-risk, liquid and currency-matched assets. Some frameworks include bank deposits; others allow short-term government debt, cash equivalents or central-bank deposits in specified proportions. Those differences affect banks, sovereign markets and the issuer’s access to liquidity.

A reserve rule also allocates risk. Treasury bills can provide a liquid and low-credit-risk asset, but large redemptions may force sales into money markets and affect sovereign yields. Bank deposits can keep funds in the banking system, but issuer balances may be concentrated and treated as more rate-sensitive wholesale funding. Central-bank reserves are the closest settlement asset, but an issuer needs a legal account and a clear regime for access.