Welcome to USD1bankers.com

This page is written for bank executives, risk officers, compliance teams, treasury managers and product leaders who need a sober, practical overview of how to evaluate, integrate and supervise USD1 stablecoins in a regulated financial institution. Throughout, we use the phrase “USD1 stablecoins” in a purely descriptive and generic sense to mean any digital token designed to be stably redeemable one to one for U.S. dollars. We do not endorse any particular issuer, technology or brand.

The policy environment has matured: global standard setters have finalized high‑level recommendations for stablecoin arrangements, while prudential and market conduct regulators are translating those into local rulebooks.[1][2] As a banker, you do not need to be a blockchain engineer, but you do need a crisp understanding of where USD1 stablecoins can reduce settlement frictions and where they can add operational, liquidity or compliance risk. This guide focuses on those practical trade‑offs.

What are USD1 stablecoins?

USD1 stablecoins are a class of digital tokens intended to maintain a fixed value equal to one U.S. dollar through a defined stabilization mechanism and legal redemption commitment. In plain English, they are dollar‑denominated tokens that live on programmable ledgers (blockchains) and are meant to be cash‑like because holders can present them for one U.S. dollar, subject to the issuer’s terms.

A stablecoin arrangement (the full ecosystem, including issuer, wallet providers, reserve custodians and supporting service providers) operates with written policies for issuance, redemption, reserve management and disclosure. International guidance applies “same risk, same regulation” by mapping systemically important arrangements to existing standards for financial market infrastructures.[2]

Key features and terms, explained in plain English on first use:

  • On‑chain transfer (movement of tokens recorded on a shared ledger) gives faster settlement finality compared with traditional message‑based payment rails.
  • Smart contract (computer code that automates specific actions when preset conditions are met) controls token issuance and redemption at the ledger level.
  • Reserve assets (the pool backing tokens, typically cash and short‑dated U.S. Treasury instruments) underpin the one to one claim and drive liquidity and interest‑rate risk.
  • Redemption at par (the right to redeem one token for one U.S. dollar) is the core consumer protection commitment in most regulatory frameworks.
  • Custody (safekeeping of client assets and private keys) can be provided by the issuer, a bank, or a qualified custodian subject to local rules.

Policy frameworks distinguish between tokens tied to a single fiat currency (for example, USD1 stablecoins) and those referencing baskets of assets. In the European Union, these are categorized as e‑money tokens and asset‑referenced tokens, with specific authorization, reserve, governance and disclosure requirements that started applying to issuers in mid‑2024.[3][4][5]

Why bankers care

Banks and regulated payment firms evaluate USD1 stablecoins for three main reasons:

  1. Faster settlement and programmability. Atomic settlement and programmable transfers can compress counterparty exposure windows in certain use cases (for example, intragroup liquidity sweeps, after‑hours corporate payouts, or cross‑border merchant settlement), while enabling automated controls (such as allowlists and velocity limits) at the token level.
  2. Client demand. Corporates, fintechs and market participants increasingly hold or accept USD1 stablecoins to reduce friction when moving U.S. dollar value across platforms and time zones. Singapore’s finalized framework explicitly aims to support the use of high‑quality single‑currency stablecoins as a credible digital medium of exchange, which has influenced bank strategies regionally.[6]
  3. Balance sheet and fee economics. Depending on structure, reserve assets generate interest income, while payment and custody services create fee opportunities. Conversely, poor design can concentrate run risk and intraday liquidity demands on the banking system, so regulators require robust guardrails.[1]

The headline for bankers: USD1 stablecoins can be useful rails and settlement assets when well‑regulated and prudently managed, but they are not magic. They shift some risks from messaging networks to code, legal structure and treasury operations.

Prudential capital and disclosures

Global banking standards now set out how banks should treat crypto‑asset exposures, including exposures to USD1 stablecoins, for capital purposes. The Basel Committee’s final standard (effective from 2025, with targeted amendments and a disclosure template phasing in by 2026) maps fiat‑redeemable stablecoins that meet stringent conditions into a lower‑risk “Group 1b” bucket; tokens that fail the tests receive a conservative treatment.[19][20][21] The conditions focus on reserve quality, redemption risk, governance and the legal structure that separates reserve assets from issuer insolvency.

For bank treasurers, this means you should assess not only market risk but also redemption mechanics (how quickly tokens can be converted to dollars during stress), reserve liquidity (cash and very short‑dated Treasuries vs. longer tenor), and operational resilience (the smart contract, wallet controls and off‑chain processes that must work during a surge). Prudential tests and disclosure templates will demand precisely that level of evidence.[21]

Compliance, AML and sanctions

Compliance expectations for USD1 stablecoins align with existing financial integrity standards. The Financial Action Task Force (FATF) requires jurisdictions to regulate virtual assets and service providers under Recommendation 15 and to implement the “Travel Rule” (a rule requiring payer and payee information to accompany transfers) for digital asset transfers. FATF’s 2024 and 2025 targeted updates show steady but uneven implementation and highlight ongoing gaps in Travel Rule enforcement and supervision.[13][14]

In the European Union, the Transfer of Funds Regulation requires originator and beneficiary information to accompany crypto‑asset transfers and is supplemented by detailed European Banking Authority guidelines, which apply from December 30, 2024.[17][18] This is highly relevant for cross‑border correspondent flows where an EU crypto‑asset service provider participates in a transfer carrying USD1 stablecoins.

U.S. expectations remain risk‑based and technology‑neutral. FinCEN’s consolidated 2019 guidance explains how existing Bank Secrecy Act rules apply to virtual asset business models, including those that transmit or exchange tokens functionally similar to USD1 stablecoins.[16] Separately, OFAC’s 2021 industry guidance reminds firms that sanctions rules apply to digital assets with strict liability; screening, geofencing, and blocked property procedures must be adapted to on‑chain activity.[15]

Takeaway: your AML and sanctions control set for USD1 stablecoins should look familiar—customer due diligence, Travel Rule, chain‑forensics where appropriate, sanctions screening, and suspicious activity reporting—augmented by controls specific to wallet management and smart contract interactions.

Rules across major regions

European Union

The EU’s Markets in Crypto‑Assets Regulation (MiCA) creates comprehensive regimes for asset‑referenced tokens and e‑money tokens. Issuers of fiat‑redeemable tokens referencing a single currency (functionally similar to USD1 stablecoins when the currency is U.S. dollars) must be authorized, meet governance and reserve standards, and provide clear redemption rights. The issuer rules started applying on June 30, 2024, and crypto‑asset service provider rules follow on December 30, 2024.[3][4][5] The EU’s Travel Rule regime complements MiCA by mandating originator and beneficiary information on transfers.[17][18]

United States (federal banking supervisors and states)

U.S. federal banking policy has clarified what nationally chartered banks may do in relation to USD1 stablecoins. OCC Interpretive Letter 1172 confirms that national banks may hold stablecoin reserve deposits when the coins are backed one to one by a single fiat currency and certain conditions are met.[9] OCC Interpretive Letter 1174 describes how banks may use independent node verification networks and fiat‑redeemable stablecoins to facilitate certain payment activities, subject to risk management expectations.[10] In March 2025, OCC Interpretive Letter 1183 rescinded a prior non‑objection process and reaffirmed that the earlier letters remain operative subject to robust risk management.[11]

The Federal Reserve in 2023 created a specialized “novel activities” supervision program for crypto and related partnerships, and in August 2025 announced it would sunset that program and fold oversight back into standard supervisory processes. That does not reduce expectations; it normalizes them within existing frameworks.[12]

At the state level, New York’s Department of Financial Services published guidance on U.S. dollar‑backed stablecoins for entities it supervises, setting baseline expectations for reserves, redemption at par and appropriate disclosures.[8] For banks serving or partnering with DFS‑supervised issuers, those expectations are highly relevant.

United Kingdom

The U.K. is building a regime in which the FCA would regulate fiat‑backed stablecoins used for payments and the Bank of England would supervise systemic payment systems that use them. A Bank of England discussion paper details proposed requirements for backing assets, wallet providers and service providers in systemic arrangements.[25] HM Treasury has trailed secondary legislation to implement the framework, building on the 2023 financial services reforms.[26] Even before final rules, U.K. banks should plan for a model where widely used USD1 stablecoins are treated “like money” in terms of payment system safeguards.

Singapore

Singapore has finalized an issuer‑focused regime for single‑currency stablecoins (including those referencing the U.S. dollar) issued in Singapore, covering reserve composition, custody, capital and disclosure—expressly targeting use as a reliable medium of exchange.[6]

Hong Kong

Hong Kong is implementing a licensing regime for fiat‑referenced stablecoin issuers with emphasis on reserves, governance and redemption rights, following joint consultation conclusions published in July 2024.[7][27]

Global policy coherence

A 2023 IMF‑FSB synthesis paper provides a global policy roadmap for crypto‑assets, with particular focus on stablecoins’ macro‑financial implications and the need for consistent cross‑border implementation.[28] Subsequent IMF notes on digital money and cross‑border payments reinforce the policy goals—improving payment efficiency while safeguarding monetary sovereignty and financial stability.[29]

Reserves, liquidity and run‑risk management

The credibility of USD1 stablecoins depends on the quality, custody and segregation of reserve assets and on effective redemption processes. Across major regimes, the themes are consistent:

  • High‑quality, liquid reserves. Short‑dated Treasuries and cash at reputable institutions are favored; longer‑dated or riskier instruments amplify mark‑to‑market and liquidity risk.[19][20]
  • Bankruptcy remoteness and segregation. Structural safeguards should keep reserves separate from issuer insolvency estates, with transparent legal opinions and trust arrangements when appropriate.[20]
  • Frequent reconciliations and attestations. Daily or near‑daily reconciliation between outstanding tokens and reserves, with regular third‑party attestations and clear public disclosure.
  • Operational capacity for redemptions at scale. Systems and banking partners must be able to handle large redemption volumes, including during stress events, without creating disorderly fire‑sales.

Banks interacting with issuers—as reserve custodians, payment agents or liquidity providers—should test redemption playbooks and define intraday credit lines, including settlement windows that align with Treasury market hours. Prudential guidance increasingly expects such pre‑arranged capacity.[19]

Operations, wallets and custody

Operational controls for USD1 stablecoins mirror those for other high‑value digital assets, with additional payment‑like considerations:

  • Wallet architecture. Use segregated client accounts where required and dedicated corporate wallets for treasury operations. Employ hardware security modules and multi‑party authorization to reduce key compromise risk. Document roles, access rights and recovery procedures.
  • Allowlists and settlement controls. For institutional flows, use allowlists (only pre‑approved counterparties can receive tokens), velocity limits and cut‑off times. These constraints can be enforced in smart contracts or upstream systems.
  • Chain analytics in context. Chain‑analysis tools can support AML and sanctions screening, but they complement rather than replace customer due diligence and traditional monitoring.
  • Business continuity and incident response. Define incident taxonomies for smart contract bugs, chain reorgs and wallet compromises, with clear decision trees for pause functions and redemptions.
  • Vendor risk management. Apply bank‑grade assessment of third‑party wallet providers, token administrators and oracle services. Require independent audits and clear service level agreements.

Accounting and reporting

Under U.S. GAAP, the Financial Accounting Standards Board issued ASU 2023‑08, which requires in‑scope crypto assets to be measured at fair value with changes recognized in net income and with enhanced disclosures. Whether a specific fiat‑redeemable token meets the ASU’s scope criteria is a fact‑pattern analysis; many tokens do, but you should confirm with auditors how USD1 stablecoins you hold or accept are classified in consolidated financials.[22]

Under IFRS Accounting Standards, in the absence of a dedicated standard, many holders have applied existing guidance (often treating certain digital assets as intangible assets or, in some business models, inventories). Standard‑setting work is ongoing; finance teams should monitor developments and maintain transparent disclosures about measurement and risk.[29]

For regulatory reporting, remember the prudential treatment discussed above (for example, disclosure templates for crypto‑asset exposures and redemption risk tests). Align your accounting policies, risk reporting and regulatory templates to avoid inconsistencies that could trigger supervisory questions.[21]

Design choices for banks

If your institution is exploring USD1 stablecoins, there are three archetypal approaches, each with trade‑offs:

  1. Offer services around third‑party tokens. Provide custody, payment rails, reserve banking and compliance services to external issuers. This can be lower risk than issuance but still demands strong vendor oversight, reserve due diligence and clear client disclosures.

  2. Join a private or consortium arrangement. Participate in a permissioned network or consortium that uses USD1 stablecoins within a closed loop. This can simplify KYC and Travel Rule compliance but may limit reach and interoperability.

  3. Issue your own tokenized dollar claim. Some banks may consider issuing their own dollar‑redeemable token to serve clients directly. Prudential, legal and operational requirements are significant, and capital treatment depends on structure. You must ensure robust reserves, redemption rights, governance and supervision consistent with applicable standards.[19]

Cross‑cutting considerations for all three models include: choice of ledger (public vs. permissioned), programmability requirements, interoperability with existing payment systems, jurisdictional licensing, and customer support operations for redemption and disputes.

Implementation playbook for financial institutions

A bank‑grade rollout for USD1 stablecoins typically proceeds in measured stages:

1) Use‑case definition and risk scoping. Identify concrete flows (for example, after‑hours corporate disbursements or cross‑border supplier payments). Map the end‑to‑end customer journey, including on‑ramps and off‑ramps. Draft a risk inventory across liquidity, operational, legal, compliance and technology domains.

2) Legal and regulatory pathway. Confirm permissible activities under your charter and supervisory expectations. If you are a national bank in the United States, align with the operative OCC letters and your exam team’s expectations. If you operate in the EU, determine whether activities require issuer authorization under MiCA or registration as a crypto‑asset service provider for specific services.[9][10][11][3][4]

3) Reserve model and liquidity management. If you will issue or tightly integrate with an issuer, define reserve composition, custody, reconciliation cadence and disclosure commitments. Build redemption playbooks, including cut‑off times and contingency access to liquidity lines.[19][20]

4) Compliance architecture. Implement Travel Rule, sanctions screening, geofencing where required, and enhanced due diligence for higher‑risk geographies and counterparties. Validate that chain‑forensics alerts are calibrated to your risk appetite and legal obligations.[13][15][17][18]

5) Wallet and key management. Adopt multi‑party authorization, segregated client accounts where applicable, strong recovery procedures, and strict change‑management for smart contract interactions. Perform regular control testing.

6) Pilot with narrow limits and clear disclosures. Start with a small client cohort, explicit limits and robust monitoring. Measure realized settlement speed, rejection reasons and reconciliation times. Iterate before scaling.

7) Scale with governance. Establish product risk committees, periodic independent model and control reviews, and transparent public reporting aligned with prudential and accounting frameworks.[21][22]

Frequently asked questions

Are USD1 stablecoins the same as bank deposits?

No. A deposit is a claim on a bank with deposit insurance and access to central bank facilities under defined conditions. USD1 stablecoins are tokens with redemption rights defined by an issuer’s terms and applicable law. Some regimes (for example, the EU’s e‑money tokens) align requirements with e‑money law to make tokens functionally money‑like, but they are still distinct legal instruments.[3][4]

Can a U.S. national bank hold reserves for a stablecoin issuer?

Yes, subject to conditions. OCC Interpretive Letter 1172 confirms authority to hold reserve deposits for certain one to one fiat‑backed stablecoins, with risk management and due diligence expectations.[9]

Do Travel Rule obligations apply to on‑chain transfers?

Yes, where applicable. FATF standards and local laws require specific originator and beneficiary information to accompany transfers through participating institutions, and the EU has made this explicit for crypto‑asset transfers.[13][17][18]

What capital rules apply if a bank holds USD1 stablecoins on balance sheet?

Under the Basel crypto‑asset standard, exposures to fiat‑redeemable stablecoins that satisfy stringent criteria can receive more favorable treatment than unbacked crypto‑assets; otherwise a conservative treatment applies. Detailed disclosure templates will phase in alongside the standard.[19][20][21]

What about accounting classification?

Under U.S. GAAP, many tokens meet the ASU 2023‑08 scope for fair value measurement, but classification of a specific instrument depends on facts and circumstances. Discuss with auditors how your holdings or client settlement balances in USD1 stablecoins should be presented and disclosed.[22]

Glossary (plain English)

  • USD1 stablecoins: tokens intended to be redeemable one to one for U.S. dollars and designed to keep a stable value through reserves and redemption commitments.
  • Stablecoin arrangement: the combined system of issuer, wallets, reserve custodians, service providers and contracts that make a stablecoin work.[2]
  • Redemption at par: the right to convert one token into one U.S. dollar, net of any disclosed fees, within a defined time frame.
  • Travel Rule: the requirement to include payer and payee information with value transfers to aid AML and counter‑terrorist financing efforts.[13][17][18]
  • Controllable electronic record: a legal term in U.S. commercial law for certain digital assets that can be controlled and transferred with negotiability‑like effects.[23]
  • Group 1b treatment: the Basel category for certain fiat‑redeemable tokens that meet strict criteria, leading to a less conservative capital charge than unbacked tokens.[19][20]

Bottom line

The direction of travel is clear. Standard setters and leading jurisdictions are converging on frameworks that make USD1 stablecoins safer and more predictable as payment instruments. For bankers, the opportunity is to deliver faster settlement and programmable money services—without compromising prudential strength or financial integrity—by aligning product design with the letter and spirit of these rules. If you approach USD1 stablecoins as you would any core payment product—through the lenses of client need, resilience, legal certainty, capital and compliance—you will be positioned to unlock practical benefits while protecting your institution and customers.

Sources

  1. [1] Financial Stability Board, “High‑level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements” (Final report, Jul. 17, 2023). See summary and materials at the FSB site. Link
  2. [2] CPMI‑IOSCO, “Application of the Principles for Financial Market Infrastructures to stablecoin arrangements” (Jul. 13, 2022). Link
  3. [3] ESMA, “Markets in Crypto‑Assets Regulation (MiCA): Overview.” Link
  4. [4] Central Bank of Ireland, “MiCAR became applicable to issuers of ARTs and EMTs on 30 June 2024; CASP rules apply from 30 December 2024.” Link
  5. [5] European Banking Authority, “Asset‑referenced and e‑money tokens (MiCA).” Link
  6. [6] Monetary Authority of Singapore, “MAS Finalises Stablecoin Regulatory Framework” (Aug. 15, 2023). Link
  7. [7] Hong Kong FSTB and HKMA, “Consultation conclusions for legislative proposal to implement a regulatory regime for fiat‑referenced stablecoin issuers” (Jul. 17, 2024). Link
  8. [8] New York State Department of Financial Services, “Virtual Currency Business Licensing” — includes “Guidance on the Issuance of U.S. Dollar‑Backed Stablecoins” (Jun. 8, 2022). Link
  9. [9] OCC Interpretive Letter 1172, “Authority of a national bank to hold stablecoin reserves” (Sep. 21, 2020). Link
  10. [10] OCC Interpretive Letter 1174, “Use of independent node verification networks and stablecoins for payment activities” (Jan. 4, 2021). Link
  11. [11] OCC News Release, “OCC Clarifies Bank Authority to Engage in Certain Crypto‑Asset Activities; issues Interpretive Letter 1183” (Mar. 7, 2025). Link
  12. [12] Federal Reserve Board Press Release, “Creation and sunset of Novel Activities Supervision Program” (Aug. 15, 2025). Link
  13. [13] FATF, “Targeted Update on Implementation of the FATF Standards on Virtual Assets and VASPs” (Jun. 2024). Link
  14. [14] FATF, “Targeted Update on Implementation of the FATF Standards on Virtual Assets and VASPs” (Jun. 2025). Link
  15. [15] U.S. Treasury OFAC, “Sanctions Compliance Guidance for the Virtual Currency Industry” (Oct. 15, 2021). Link
  16. [16] FinCEN, “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies” (FIN‑2019‑G001). Link
  17. [17] European Union, Regulation (EU) 2023/1113 (Transfer of Funds Regulation, including crypto‑asset transfers). Link
  18. [18] European Banking Authority, “Guidelines on information requirements in relation to transfers of funds and certain crypto‑assets transfers (Travel Rule Guidelines)” (apply from Dec. 30, 2024). Link
  19. [19] Basel Committee on Banking Supervision, “Prudential treatment of cryptoasset exposures” (final standard, Dec. 2022). Link
  20. [20] Basel Committee on Banking Supervision, “Cryptoasset standard amendments” (Dec. 2024) — clarifications including reserve bankruptcy remoteness and stablecoin conditions. Link
  21. [21] Reuters, “Banks to publish crypto‑asset exposure from January 2026, say global regulators” (Jul. 3, 2024). Link
  22. [22] FASB, “ASU 2023‑08 — Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350‑60): Accounting for and Disclosure of Crypto Assets” (Dec. 2023). Link
  23. [23] Uniform Law Commission, “2022 Amendments to the UCC” — overview and materials for Article 12 (Controllable Electronic Records). Link
  24. [24] Willkie Farr & Gallagher, “UCC Article 12, Controllable Electronic Records” (state adoption overview, Aug. 5, 2024). Link
  25. [25] Bank of England, “Regulatory regime for systemic payment systems using stablecoins and related service providers” (Discussion Paper, Nov. 6, 2023). Link
  26. [26] HM Treasury, “Regulatory regime for cryptoassets (regulated activities) — draft statutory instrument and policy note” (Apr. 29, 2025). Link
  27. [27] Hong Kong Monetary Authority, “Regulatory Regime for Stablecoin Issuers” (overview portal). Link
  28. [28] IMF and FSB, “IMF‑FSB Synthesis Paper: Policies for Crypto‑Assets” (Sep. 7, 2023). Link
  29. [29] IMF, “Digital Money, Cross‑Border Payments, International Reserves, and the Global Financial Safety Net — Preliminary Considerations” (IMF Note 2024/001). Link