Stablecoin
A digital token designed to stay near the value of a reference currency. A dollar stablecoin aims to stay near $1.
The target is not a guarantee.
Session 9 · October 15
Stablecoins & the banking business
Could you issue a stablecoin? Would you want to? Explore a new way to move money—and the business challenges behind it.
01 · Watch
Stablecoins, global banking & the global economy
Play the YouTube lesson below, then use the explanations to review. The chapter buttons jump to the main topics.
If the player cannot load, use Watch on YouTube below.
Video: 30 minutes · Liam narration · Research snapshot: October 10, 2026
02 · Understand
A digital token with a financial promise
Issuer
The organization responsible for creating the token and making the redemption promise. The issuer is different from the app selling it.
Reserves
The backing assets, such as cash or short-term government securities, that support the promise to pay holders back.
1
Buy
An eligible customer pays $100. The issuer creates 100 dollar tokens and holds backing assets.
2
Pay
The customer sends the 100 tokens to a supplier that accepts them. Existing tokens move between people.
3
Redeem
An eligible holder exchanges tokens back for dollars. The issuer removes those tokens from circulation.
What do “peg,” “redemption” and “depeg” mean?
Peg: the intended reference value. Redemption: exchanging a token back through the issuer under its terms. Depeg: the token’s market price moves away from its target. Fees, account eligibility and delays can affect redemption.
A token is not automatically an insured bank deposit. A familiar brand, a large market size, or a price near $1 does not remove issuer, access or fraud risk.
Why a customer might use one
An international student wants to send tuition money. A small exporter wants to receive a payment outside bank opening hours. A household wants access to foreign-currency value.
The benefit depends on legal access, acceptance and the total conversion cost.
Why a customer might avoid one
A bank transfer may already be cheap and easy. The recipient may need local cash, not tokens. A mistake or failed provider can be difficult to resolve.
Compare usable money received, cost, speed and customer protection.
03 · Compare
Not only dollars: euros, yen and other currencies
Stable in one currency does not mean stable in another. A euro token can keep its euro target while its dollar price changes with exchange rates.
| Token | Currency target | Issuer / issuing entities | Size | Learn more |
|---|---|---|---|---|
| USDT | US dollar | Tether International | $184.08bn | Official site ↗ |
| USDC | US dollar | Circle issuing entities | $73.02bn | Official site ↗ |
| USDG | US dollar | Paxos Singapore / Europe | $3.05bn | Official site ↗ |
| PYUSD | US dollar | Paxos Trust Company, N.A. | $2.88bn | Official site ↗ |
| RLUSD | US dollar | Standard Custody & Trust | $2.45bn | Official site ↗ |
| EURC | Euro | Circle | $495.3m | Official site ↗ |
| EURCV | Euro | SG-FORGE | $187.7m | Official site ↗ |
| JPYC | Japanese yen | JPYC Inc. | $22.0m | Official site ↗ |
| XSGD | Singapore dollar | StraitsX | $13.0m | Official site ↗ |
DeFiLlama snapshot; rounded and not live. These are selected examples, not a complete ranking. Entity and redemption terms can vary by jurisdiction. Market size is not revenue, transaction volume or a safety rating.
Selected dollar tokens · USD billions
Selected other-currency tokens · USD millions
Read the units: the left chart uses dollar billions; the right uses dollar millions. The separate charts have different scales. One billion yen is not one billion US dollars.
Are all stablecoins backed in the same way?
No. Some use cash and short-term government debt. Others use cryptocurrency collateral or financial hedges. Examples such as USDS and USDe need a different risk analysis. Do not assume every token with a dollar target has the same backing or legal rights.
Prices close to $1: read the scale
USDTUSDC
Actual CoinGecko daily quotes, July 13–October 10, 2026. The narrow vertical scale makes tiny changes visible. Daily observations can miss brief intraday problems. This is not a prediction of future stability.
04 · The business question
“Can I issue a stablecoin and become a banker?”
You can build a business around payments. But creating a token does not automatically make you a licensed bank.
Use a stablecoin
Accept a supported token for your own sales, where allowed. Think about how you will turn it into money your business can spend.
Offer a payment service
Help customers make payments through a regulated partner. Handling money for others may create licensing and compliance duties.
Issue a stablecoin
Make the backing and redemption promise yourself. You need the relevant permission, reserves, controls and a credible business plan.
How an issuer might earn money
Backing assets may earn interest. But the issuer must pay staff, protect customers, manage reserves and follow the rules.
$10 million × 4% = $400,000
That is annual gross reserve income in a fictional example—not profit. Costs can use much of it, and rates can fall.
The 4% rate is illustrative. Holders do not automatically receive reserve interest.
Before you launch, ask:
- What customer problem would I solve?
- Why would people trust my promise?
- Can I obtain the required permission?
- Can customers reliably get their money back?
- Can the business survive after all costs?
The rules differ around the world
United States · GENIUS Act
Enacted July 18, 2025. It sets a framework for permitted payment-stablecoin issuers, eligible 1:1 reserves, disclosures and supervision. It does not let anyone issue unbacked dollars.
Treasury’s August 2026 materials described January 18, 2027 as the expected general effective date. CLARITY is a separate, broader market-structure bill; this lesson does not treat it as enacted.
European Union · MiCA
A single-currency e-money token generally needs an authorized bank or electronic money institution as issuer, with disclosure and holder-rights requirements.
Japan
Issuance uses regulated bank, funds-transfer or trust structures. Issuing a token and operating an exchange or payment intermediary are different activities.
Singapore & Hong Kong
Singapore’s SGD/G10 framework was still undergoing legislative implementation consultation in September 2026. Hong Kong introduced issuer licensing in 2025 and announced its first two licenses in April 2026.
Legal status is dated October 10, 2026. Implementation and proposals can change. Official sources are linked below.
05 · Banks & the economy
Who gains, who faces competition?
Pressure on banks
- Payment competitors can reduce bank fee income.
- Customers may move deposits away.
- Replacing cheap deposits can make funding more expensive.
- Higher costs may affect loan prices or availability.
Reasons banks may still matter
- Households and businesses still need loans.
- Local banks know local borrowers.
- Banks can hold reserves and offer payment partnerships.
- Better bank services can respond to competition.
A community-bank example
A bank replaces $10 million of deposits costing 1% with funding costing 4%. Its extra annual cost is $300,000. That can squeeze profits or raise loan costs. It does not automatically mean the bank will fail.
Fictional calculation: $10m × (4% − 1%). Money may move elsewhere in the banking system rather than disappear.
Why Treasury demand could increase
More dollar tokens → more required backing → issuers may buy more US Treasury bills.
Extra demand can support bill prices and reduce yields, other things equal. This could help some government financing costs.
It does not erase US debt or guarantee lower borrowing costs everywhere. Bank credit and Treasury financing can be affected differently.
Global access: benefits and limits
Foreign-currency tokens may help some households and businesses facing unstable local currencies or costly payments.
Iran and Venezuela have different conditions. Sanctions, provider access, conversion costs and freezing powers can limit use. Local banks do not inevitably disappear.
What could slow development?
Trust & safety
Weak backing, fraud, difficult refunds, unreliable redemption or a failed provider can drive users away.
Costs & rules
Licensing, security and compliance are expensive. Different national rules complicate global operations.
Customer adoption
People need a clear reason to switch. Merchants must accept it, conversion must be practical, and banks may improve their own services.
A long-term role is possible, not guaranteed. Judge usefulness, trust, costs, competition and workable rules. It is too early to promise that stablecoins will replace banks or automatically improve the whole economy.
06 · Check your understanding
10-question practice quiz
Choose one answer for every question. Then check your score and read the explanations. This practice score stays on this page; it is not submitted to a gradebook.
07 · Make your argument
Homework: Would you become a stablecoin issuer?
Answer all three questions in your own words. Suggested length: 300–500 words total. Use examples from the video or lesson and consider at least one argument against your own view.
You may answer yes, no or “it depends.” You are assessed on your explanation and evidence—not which side you choose. No coding, token purchase or real-money activity is required.
Due date: as announced in class. Submit through Blackboard or email mfoley3@ju.edu.
Explain your business idea or your reasons for avoiding it. Who would use it? How would you earn money? What costs, permission and customer responsibilities would you face? Explain why issuing a token is not automatically the same as running a licensed bank.
State your view. What customer need could keep them useful? What might make people return to bank payments or choose another service?
Choose two or three obstacles. Explain why they matter and how a business or policymaker might address them. Consider trust, backing, laws, costs, safety, acceptance or bank competition.
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0 words across your three answers
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Sources, official websites & data notes
- GENIUS Act · Public Law 119-27 and Treasury implementation proposal.
- CLARITY · Senate procedural vote, September 15, 2026.
- EU MiCA · ESMA · Japan FSA FAQ, question 9.
- Singapore MAS · September 2026 consultation · Hong Kong HKMA · first licenses.
- DeFiLlama market-size tracker · CoinGecko price data.
- BIS · stablecoins and safe-asset prices · BIS · macroeconomics of stablecoins.
- IMF · emerging-market use · OFAC · virtual currency guidance.
This lesson simplifies the business concepts. It does not predict particular investment returns. Dollar figures and legal status are dated snapshots; the income and bank-cost examples are fictional.