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Key facts (as of 29 October 2026)
- Reserve rule: every major regime requires 1:1 backing in cash and short-dated, high-quality assets, held apart from the issuer's own funds.
- Redemption window: US (OCC rule) 2 business days. UK T+1. Hong Kong and the UAE by the next business day. New York T+2. Singapore 5 business days. The EU sets no window but grants a right to redeem at par, at any time, with no fee (private.law).
- Effective date: the OCC's GENIUS Act rule was issued on 21 October 2026, published in the Federal Register on 23 October and takes effect on 18 January 2027.
- Precedent: USDC fell below US$0.87 in March 2023 when US$3.3bn of its reserves sat at Silicon Valley Bank (CNBC).
- Freezes: Tether said its law-enforcement cooperation had led to more than US$4.4bn of assets being frozen by 23 April 2026 (Tether).
A fiat-backed stablecoin is a claim on a private issuer. The token holds its value only because holders believe they, or someone they can sell to, can redeem it for money at par. Two things decide whether that belief is justified: what sits in the reserve and how quickly and cheaply redemption works. A third, often forgotten, is who is allowed to redeem: most holders cannot go to the issuer at all.
Reserves by jurisdiction
| Regime | Permitted reserve assets (summary) | Segregation | Reporting |
|---|---|---|---|
| US, GENIUS Act and OCC rule | Cash, deposits, Treasuries up to 93 days, repo and government money market funds | Separate from issuer funds | Composition disclosed monthly |
| EU, MiCA (EMT) | At least 30% on deposit at credit institutions, the rest in highly liquid instruments in the same currency (Art. 54) | Segregated, protected in insolvency | Regular public disclosure |
| UK, FCA PS26/10 | Backing assets held on statutory trust for holders under CASS 16; up to 20% may be held with intragroup custodians (private.law) | Statutory trust | FCA reporting |
| UK, Bank of England systemic regime | Up to 70% in short-dated gilts; a £40bn issuance guardrail (private.law, policy of 22 June 2026) | — | BoE supervision |
| Hong Kong, Cap. 656 | Cash, deposits up to 3 months, 0%-risk-weight sovereigns up to 1 year, overnight reverse repo; held on trust with a licensed bank custodian | Trust | HKMA |
| Singapore, MAS framework | At least 100% in cash, cash equivalents and debt up to 3 months from issuers rated AA− or above | Segregated | MAS supervision |
| Japan | Trust-type stablecoins may hold up to 50% in government bonds (private.law) | Trust | FSA |
Source: private.law comparison of regimes, updated 25 October 2026. In practice, Circle's published USDC reserve is split across bank deposits, deposits at systemically important institutions, overnight reverse Treasury repo and Treasuries under three months. Part is held in the Circle Reserve Fund, an SEC-registered 2a-7 money market fund managed by BlackRock, with monthly Big Four assurance.
Issuer capital floors
Reserves cover the tokens. Capital covers the issuer's own operational losses.
| Regime | Minimum own funds (as summarised by private.law) |
|---|---|
| EU e-money institution issuing EMTs | €350,000 or 2% of average outstanding e-money, whichever is higher |
| UK (FCA PS26/12) | £350,000 or 1% of issuance |
| Singapore | S$1m or 50% of annual operating expenses |
| US | Set by the OCC rule and state regimes; see GENIUS Act and the OCC rule |
Redemption by jurisdiction
| Regime | Redemption window | Fee | Notes |
|---|---|---|---|
| US, OCC final rule | Within 2 business days | Published policy required | Requests over 10% of issuance in 24 hours must be reported to the OCC |
| New York (NYDFS guidance) | T+2 | — | RLUSD, issued by Standard Custody, follows T+2 (private.law) |
| EU, MiCA EMT | At par, at any time | No fee allowed | Recovery plan can limit under stress |
| UK, PS26/10 | At par by T+1, timed from receipt of the token (private.law) | — | — |
| Hong Kong | At par within 1 business day | — | — |
| UAE, CBUAE | By the same time on the next business day | — | — |
| Singapore | Within 5 business days | — | — |
| Unregulated / contractual (USDT) | Per issuer terms | Greater of US$1,000 or 0.1%; US$150 verification | US$100,000 minimum |
private.law works through an example. Redeeming US$5m of USDT costs about US$5,000. The same amount redeemed against an EU EMT issuer costs nothing, because MiCA forbids the fee.
NoteMost businesses never redeem directly. They sell to an exchange, OTC desk or payment partner. The on-chain price then depends on market liquidity, not only on the issuer's terms. Direct redemption access is a backstop worth knowing about, even if it is rarely used. See On-ramps and off-ramps.
Depeg risk
A depeg is when a stablecoin trades away from its reference value. Known causes:
| Cause | Example | What it looks like | Typical duration |
|---|---|---|---|
| Reserve impairment or access | USDC and SVB, March 2023 | Price falls to about US$0.87, then recovers when deposits are protected | Days |
| Design failure | TerraUSD, May 2022 | Price collapses and does not recover | Permanent |
| Regulatory exclusion | USDT in the EEA; Coinbase conversion of 14 tokens on 30 October 2026 | Price holds but venues and partners disappear | Ongoing |
| Freezes | Tether's US$4.4bn of blocked balances | Specific balances become worthless to their holders | Until unfrozen, if ever |
| Liquidity gaps | Small tokens on thin markets | Wide spreads on large tickets | Hours to days |
WarningA stablecoin is not a bank deposit. Deposit insurance does not cover it. The GENIUS Act bars issuers from implying a government guarantee.
What to do when the peg slips
flowchart TD
A[Price alert: token below 0.995] --> B{Is the cause issuer-specific?}
B -- No, market-wide stress --> C[Pause new receipts in that token]
B -- Yes --> D[Check issuer statements and attestation]
D --> E{Direct redemption available to us?}
E -- Yes --> F[Redeem at par within regime window]
E -- No --> G[Sell or swap via pre-agreed OTC or off-ramp]
C --> H[Re-route settlement to second token]
F --> I[Record loss or gain and notify finance]
G --> I
H --> I
I --> J[Review exposure limits]The flow above is a generic playbook, not a regulatory requirement. The point is to decide thresholds and routes before a stress event, not during it.
Timeline of key reserve and redemption events
| Date | Event |
|---|---|
| May 2022 | TerraUSD collapses |
| March 2023 | USDC falls below US$0.87 during the SVB failure, then recovers (CNBC; private.law) |
| 30 June 2024 | MiCA EMT reserve and redemption rules apply |
| 27 Nov 2025 | Final redemptions of Tether's euro token EURT |
| 4 Feb 2026 | UK FSMA (Cryptoassets) Regulations 2026 made (private.law) |
| 22 June 2026 | Bank of England systemic stablecoin policy (private.law) |
| 21 Oct 2026 | OCC issues GENIUS Act final rule; Federal Register publication 23 Oct |
| 18 Jan 2027 | OCC rule takes effect |
| 25 Oct 2027 | UK FCA cryptoasset regime commences |
Practical controls
- Hold settlement balances only for as long as the settlement cycle needs.
- Spread exposure across more than one issuer and venue, with written limits per token.
- Monitor secondary-market prices and issuer attestations, and set alert thresholds.
- Keep a tested route to fiat for each token held, including a backup off-ramp.
- Understand which entity you are entitled to redeem against, and in which jurisdiction.
- Record which token and chain each balance sits on; regimes and freeze practice differ.
Illustrative example: sizing exposure
Illustrative example. All figures are invented.
An operator settles about US$2m a week to PSP partners in stablecoins. It decides never to hold more than three days of flow in any single token, so its cap is roughly US$860,000 per token. It holds USDC as its main token and USDT only for partners that require it, converting USDT to USDC within 24 hours. A 1% depeg on a US$860,000 balance would cost about US$8,600, which the finance team judges acceptable. A 13% depeg like USDC in March 2023 would cost about US$112,000, which is why the policy also requires a same-day route to fiat.
Q/A
Why does the EU have no redemption deadline?
MiCA grants an unconditional right to redeem at par at any time. private.law notes this is stronger in normal conditions but can be limited under stress by the issuer's recovery plan.
Does a monthly attestation mean the reserve is audited?
No. An attestation is a point-in-time report. Its scope depends on the regime and the firm doing it.
Who can actually redeem with the issuer?
Usually only onboarded, verified customers. Retail holders and most merchants sell on the secondary market. Under MiCA, holders of an EMT have a legal claim on the issuer, which is stronger than a purely contractual right.
What happens to reserves if an issuer fails?
Regimes require segregation or trust structures so that reserves go to token holders rather than general creditors. How well that works in practice has not been tested in a large regulated failure.
Is a depeg the same as a freeze?
No. A depeg affects everyone holding the token. A freeze affects specific addresses.
Can an issuer suspend redemptions?
Regulated regimes restrict this, but recovery and resolution plans can allow limits under stress. Read the issuer's terms.
Sources
- private.law, Stablecoins (updated 25 October 2026): https://wiki.private.law/en/stablecoins
- Circle, transparency and stability: https://www.circle.com/transparency
- Tether, fees: https://tether.to/en/fees/
- OCC Bulletin 2026-50: https://www.occ.gov/news-issuances/bulletins/2026/bulletin-2026-50.html
- Federal Register, OCC GENIUS Act final rule (23 October 2026): https://www.federalregister.gov/documents/2026/10/23/2026-21706/implementing-the-guiding-and-establishing-national-innovation-for-us-stablecoins-act-for-the
- FCA, gateway to regulated crypto opens (30 September 2026): https://www.fca.org.uk/news/press-releases/fca-opens-gateway-regulated-crypto
- FCA, PS26/10 stablecoin issuance: https://www.fca.org.uk/publication/policy/ps26-10.pdf
- CryptoSlate (27 October 2026): https://cryptoslate.com/coinbase-sets-3-day-mica-deadline-for-usdt-paypal-and-trump-linked-stablecoins/
- CNBC, USDC breaks dollar peg after US$3.3bn SVB exposure (11 March 2023): https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dollar-peg-after-firm-reveals-it-has-3point3-billion-in-svb-exposure.html
- Tether, freeze of more than US$344m (23 April 2026): https://tether.io/news/tether-supports-freeze-of-more-than-344-million-in-usdt-in-coordination-with-ofac-and-u-s-law-enforcement/
FiatDesk Wiki is educational. Not financial or legal advice.