1020. Insights: How ready are you for stablecoin regulation?

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1:03Hello and welcome to Fintech Insider Insights by 11FS. I'm your host, Benjamin Ensor. Today we're diving into one of the more complex areas of digital finance, stablecoin regulation. With the US Genius Act outlining the next chapter in digital asset oversight, the European Union's Markets in Crypto Assets, or MECA, regulation providing a cohesive legal standard across member states, and amendments to the UK's Financial Services and Markets Act opening the door for stablecoins to be recognized as a form of payment. Stablecoins are rapidly moving into the mainstream. Fintechs, platforms, payments companies, financial services businesses, merchants and corporations all need to be ready.

1:45Here on Fintech Insider, this week in partnership with Formance, we are helping you navigate what's coming. This is your shortcut to getting stablecoin ready. So let's get into it. And I'd like to welcome three fantastic guests. First of all, we have a Fintech Insider debut for Thierry Koopman, Partnerships and Payments Lead at Formance. Welcome to the show. Can you tell us a little bit about you and your role at Formance, please? Yeah, thanks for having me. Well, at Formance, we are a technology company and we build a ledger and payments infrastructure in open source. So it helps fintechs and platforms.

2:28to be able to really know where the money is across wallets, bank accounts, stable coins, and any other what they would call real world assets in the crypto space. And we go all the way down to accounting entries, so it's basically a ledger. Me, myself, I spent about 25 years in technology within the payment space, and I have discussed a lot with what the people call the blockers of the industry, the compliance, the legal, the finance. but I've been running operations enough to make sure to know what is necessary to enable products and services here. I like to think of the bits that you call blockers as the bits that create trust.

3:10But yes.

3:15So welcome to the show. We also have a Fintech Insight debut for Inna Kostiuk, Business Development Manager for the Crypto Vertical at Worldline. It would be wonderful if you could also introduce yourself, Inna, and tell us a little bit more about Worldline and your role there. Hi, everybody. I'm Inna Kasyuk, and I'm growing crypto vertical within Worldline payment registration. And my main role, actually, is to help merchants to fix all their payment needs in one platform. It means that merchants ask if they need to have fast time to market, to need to optimize their payment flows for different payment providers or payment methods.

4:02Also, who would like to have a mix of digital assets and traditional rails. So, they definitely use payment registration and, of course, to have a best cost optimization. So, that's why I'm here. Fantastic. Welcome. And I'm also delighted to welcome Dia Markova, Director of Policy at Fireblocks. Welcome to the show. Can you tell our listeners a little bit more about you and your role at Fireblocks, please? Thanks for having me. Indeed, I look after policy at Fireblocks, Fireblocks being the digital assets platform. We predominantly provide custodial technology and treasury management to anywhere between crypto natives to corporates and increasingly traditional finance and payments institutions.

4:56And my role is to represent the company in front of policymakers and governments globally and work with our teams to understand the impact of policy change on our product and our clients. So as you can imagine, I say stablecoin once every five minutes for the past year. Perfect. That's just who we need for this. Well, welcome to all three of you. So let's get started. The stablecoin market has grown tremendously over the past few years, unsurprisingly for sort of a new thing, and now sits at about$300 billion, which is a sharp increase just in the past year or two. Growth is being driven by a whole range of things, including sort of institutional adoption, payment providers, embedding stablecoin rails, and so on.

5:47And what we'd love to do is explore a little bit about what does this growth mean and how does regulation enable it? So let's start with that adoption. What's currently sort of driving that adoption? Where are we seeing adoption coming from? Thierry, maybe I can start with you. What do you think is driving stablecoin adoption? Where are you seeing adoption coming from? I think adoption comes from technology. So technology has enabled a lot of new things within the financial industry and these technologies have been problems looking for a solution i think with stable coins part of it is that it is a solution to a industry problem and that's why a lot of people are active in it and are trying to put in what is necessary to get the benefits out of it.

6:40So it comes with a lot of promise and the adoption rate will increase and hopefully the promises will be realized. Thank you. Inna, are you seeing either particular regions or particular use cases really driving adoption of stable coins? Can you say that there's a sort of a pattern where we're seeing certain regions, certain types of player in the market really adopting fast? Definitely. And how I see it or how I interpret it is where fear doesn't work, we see the faster adoption of the stable coin. And these markets are LATAM and African festival. And one of the reasons because they're always looking for innovation and for alternative because a lot of population is still under bank and they need to have a different way of processing payments.

7:43And if in Western Europe we are still asking, will this stablecoin really long-term play? Is it like infrastructure just change or it's something which we can rely on and we rather want to wait and see? It's often Western mentality on that. And especially we want to ensure these regulations. And like in Brazil, Nigeria, and probably Argentina, it's not really questions. They just go and do it because stablecoin is really solving the problem. And probably we'll get later on the problem-solving part, correct? Yeah, is it as simple to say that there's a sort of correlation with inflation? Countries that have historically had high inflation or have currently got high inflation like Argentina or Zimbabwe and so on, where we're seeing some of the most interest.

8:35Is that fair? For me, yes. Often the very high inflated countries are looking for the source of stability, which would be, for example, USDC is a wave. And, Dia, how important has regulation been to enabling the growth or encouraging the growth of stable coins? I mean, it seems as though the growth in stablecoins over the past few months has sort of been strongly encouraged by the passage of legislation and the clarity of regulation that comes with that. Is that true or is it just a coincidence of timing? I think it's true to an extent, right? So a lot of conversations we've been having with coins this year has started with the word genius in it, irrespective of whether these coins are sitting in Asia, Europe or the US or indeed.

9:29Sub-Saharan Africa or LATAM, right? So I think the permissiveness of the new U.S. administration towards stable coins and towards digital assets was a global unlock. But what we're now seeing is that regulatory clarity is one of the building blocks that you need. The other one is just commercial logic, right? So when you have big remittance corridors, when you have sort of big cross-border supply chains that can be more quickly managed through a stable coin payment. That's where the issuance is. That's where the option is, right? So you kind of have the combination of both regulatory permissiveness.

10:08And I should say, I would make a distinction between permissiveness in the letter of the law and permissiveness in the attitude of regulators and central bankers, because the second is quite important and perhaps not so easy to quantify, but in markets where the central bank is really kind of like calling up the domestic players and saying, hey, you know, can you start adopting this? You see a lot more, a lot less risk aversion from the payments industry and the banking industry than in markets where the letter of the law might be permissive, but the attitude of the regulators is not. So the United States would seem like an obvious example of a country where attitudes may be shifted with a change of administration.

10:49To say the least. Have we seen other countries where we've seen a sort of a change in attitudes. Thierry, I don't know if you've seen that in some European countries or elsewhere, where there's certain countries that are maybe encouraging stablecoin more in the way Diaz is suggesting. Yeah, so the interesting part here, as Diaz mentioned, Europe has been on the forefront of digitalization and I think since early 2000, we had e-money already in the regulation. and then we actually had what you could call a prototype of e-money in place in Europe whereas I don't think anybody on the top of their head can state one or two e-money issuers today they're not known it's there it fuels an industry but nobody knows they're an e-money issuer Now, MICA actually catched up on the fact that e-money issuers become public on the public blockchain.

11:56And so this means you will have much more visibility on those. And the European law already allows this. I think Dia has more details than me, but earlier than what the US did. but the US kind of kicked the industry in the ass to get going with the products and the technology and to start offering this in the market because there's a real need there. Let's talk about the genius actor a little bit. Diyan, maybe I'll come to you first. Some people sort of call it the world's most comprehensive stablecoin framework and it's certainly established rules, it's given some clarity. why have so many people been talking to you about the Genius Act?

12:45Why is the Genius Act so important? I think one unpopular opinion is that the Genius Act and Mika are not that different or rather it's unpopular depends on your audience. But I think from the letter of the law they are like 80 % the same. And that's not a, like I haven't really compared like word for it to get to the 80 number but they're more or less the same. There are some important differences. And I'll name two. One is that Genius allows a higher percentage or all the reserves of a stablecoin to be put in earning assets. So in short-term T-bills, whereas Mika puts that number a bit lower.

13:27And the second thing that Mika does, which no one else in the world really has done since, is to require foreign stablecoins to establish presence in the European Union, move their reserves accordingly, get a license, right? So that makes the life of the circles and the tetras of the world very different in the European Union compared to other parts of the world. But the reason why the Genius Act, I think, gets all the credit and Mika doesn't get quite as much credit at all, is this kind of attitude point that I was making earlier, right? So there are details from Genius that we don't know yet because the primary law is now being cascaded through the agencies and they're working through the details of how to put it.

14:10how to actually put the law in practice. But it was a very big symbolic gesture from a very big economy to say that stablecoins are now a legitimate form of money and money on chain. And actually that gesture and that narrative, we don't even have in the European Union today, right? So the law is there. 70 new stablecoins have been issued under MECA by a combination of payment service providers or banks or conglomerates or consortiums of banks. And yet, various central bankers in the EU, not least from Frankfurt and across the pond from the UK, are still going on stage and saying, well, we don't trust stablecoins as much as we trust other forms of money.

14:59But they are regulated the same. Right. We've got. So I think the reason why everybody's talking to us about genius and very few, much fewer clients are starting their narrative with Mika is because of that clarity, that also that intention that supplemented the letter of the law. Yeah, so I follow you completely because I've been working in the industry and so banks have a banking license, obviously, and implicitly they are allowed to do e-money services and payment institution services. So you see banks, and especially then in certain countries like France, doing payment institution services like card acquiring and everything else.

15:44But you haven't seen in Europe a bank or a credit institution offering e-money institutions. Why would they? And now the Genius Act is out, and suddenly you have like seven or nine banks banding together. Let's create an e-money institution to issue a stablecoin. I'm like, wait, wait, why? So what happened? You've been able to do this since 20 years already. So something is happening there. What do you think, Anna? Well, I always look at it from the perspective of the merchant, of the real market. And for now, when I talk to merchants, to businesses, and mainly this is Mika, is focusing on a high-risk business, which is, I believe, it's absolutely wrong because stablecoin and with Mika license solving totally different problems.

16:47They're solving problems of settlement, of cheaper remittance on cross-border payments standpoint, so not really high-risk demand, but because high-risk vertical always have to be much more creative due to regulations and rejections of Visa, MasterCard, and some other traditional rails, they are faster adopters of stablecoin. But it does not exclude that stablecoin, actually is the most relevant for low-risk merchants. But I believe if stablecoin doesn't go to that category of low-risk merchants, they're not going to reach their potential because high-risk vertical is still very limited and they're not going to cover everything there.

17:44Got it. So you're saying one of the crucial differences is in Europe, stablecoins are still sort of perceived as a relatively high-risk instrument used by high-risk sectors. Whereas in the United States, when you've got the president issuing his own stable coins or his own crypto assets, you have a very different sort of atmosphere, a very different notion. Do we need to see President Macron issuing a cryptocurrency to sort of kickstart or cancel a Mertz? What needs to happen in Europe? Well, funny, I don't actually know if Fire Vlogs has like a company line of what we think about world leaders issuing stablecoins, but I'll make a personal comment in thinking that that's, you know, regulated institutions with the permissible licenses are probably best place to issue various backed or unbacked assets.

18:46That would probably be my personal line. But look, I mean, Macron was part of this conversation up to a point, right? So a couple of years ago, when the first global stablecoin issuers started thinking of where to get their licenses from, the Elyse indeed was an active participant in that conversation. And there was a narrative in France that France being, wanting to be the digital finance, the digital leader of the EU, they would, they want to attract these kind of businesses. And they did. They did attract the main business of Circle to getting their license there. and, you know, sort of France being occupied or Délissé being occupied by other priorities has actually moved the political kind of positivity of Europe towards stablecoins away from what it was.

19:42So, yeah, I mean, probably the fact that he didn't issue his stablecoin but he paid attention was positive. Yeah, he might be slightly politically exposed or flagged as a pep, as they say. Indeed, indeed. We haven't really mentioned the UK just in the sort of last moment. Has the UK left it a bit late? I mean, the UK was a leader in an area like open finance, but the UK's sort of fallen a bit behind the rest of Europe here, correct? Anyone disagree with me on that? They're playing catch-up, I think. Yeah. But presumably for the market, the more closely aligned the British regulations are to Mika, essentially the better, correct?

20:26Because it just adds more complexity if the British go down a completely different path or are there opportunities if the British regulations diverge? Well, I do think that the UK find itself quite literally between the US and the EU in policy choices, right? So there was some talk around the President's Trump visit earlier in the year, and there is now a Treasury U.S. initiative being set up, sorry, U.K. U.S. initiative being set up, including around the issue of stablecoins. So there is this sort of notion that some form of alignment could be pursued by big capital market centers around stablecoin legislation, right?

21:18And I do think that the UK is in a position to choose whether to align itself a little bit more to the West or a little bit more to the East in terms of US EU.

21:29So to your point, you know, is it better for business that the laws are the same? Yeah, of course. But which one of the two frameworks will the UK choose to align itself to? Would that, I think, also make a difference between it remaining in sort of like a secondary lagging position or actually quite quickly catching up? What I see from the business perspective, since Brexit, UK had to focus on launching their own license for all businesses like FCI. UK been quite busy and I know that a lot of businesses had to separate their offices and to apply for double license which actually I believe could delay all the processes maybe in terms of like forward thinking they're choosing which laws they will join more like genius in the US or MECA in Europe or something in between but I think operationally it will take them a bit of time to catch up, but it doesn't mean that in a few years they will be pretty much in the same position.

22:44Thank you. Okay, we will take a very quick break here. When we're back, we'll unpack what all of this means for companies' roadmaps. How can businesses anticipate these frameworks and position themselves to thrive as stablecoin regulation evolves? Through 2025, we saw brands from every corner of financial services take their user experiences to the next level. From personalization and investments to AI chatbots and crypto, end users are more empowered than ever when it comes to managing their money, and we expect that trend to continue through 2026. If you're interested in keeping up with the latest product trends, feature releases, and UX insights from brands like Monzo, Revolut, Starling, Nubank, and more, then 11FS Pulse is the tool for you.

23:34Benchmark your product against the very best by analyzing over 20 ,000 user experiences from more than 850 global brands, each handpicked and analyzed in depth by product specialists. Find out more at 11fs.com slash pulse.

23:53Welcome back. In the second half of this podcast, we're diving into what compliance and regulatory readiness really mean in a post-Genius Act world, and why it's not just about technology, but also about systems, teams, and processes. So Thierry, I'd love to start with you. How can sort of fintechs and other companies embracing stablecoins translate some of those policy requirements, things like sort of reserve transparency, custody standards, and audits into actionable business processes? I mean, what does it mean for the sort of stablecoin issuers? And what does it mean for companies using stablecoins?

24:30So the stablecoins, so payment stablecoins or e-money, they're all basically based on being backed by liquidity. So cash on the bank or key bills or something that's very, very liquid immediately available. The link between issuing the payment stablecoin as a currency and the fiat that is backing it has to be quite heartening. I think the PSD too has a sub article that basically says, you need to make the booking within 24 hours, which is actually an artifact of how financial institutions provide information to their customers, because they only provide it once every 24 hours and not in the weekends.

25:27And so that goes completely against the user expectation of being 24-7 and always available. So there's a challenge there on making sure that what you have on the bank and what you've been booking is actually corresponding correctly. You'll probably sell stablecoin because that's basically what you're doing if you're issuing it. and you might be using an acquirer for that, that already provides you the approval of the money, but you don't have the money yet. So should you issue it then or not? Can you issue it then? Does the authorization give you confidence enough on having the liquidity available or not?

26:15So those are operational things with a slightly technical thing to consider because you want to address user expectation. You want to make that stablecoin available as soon as possible. That's where the on-ramp challenge comes in. And basically, if the on-ramp takes three days, then you haven't really solved the problem, right? So that's one thing. The second thing is, so you have to be on the books, having your liquidity in line with what you've issued. And there is no, how can I say, maybe Dia has more insights on that, but I don't know how much my stablecoin issuer or my e-money issuer has on the bank.

27:07So I cannot ask his bank because that's a relationship between the bank and its customer, so they won't share it with me. I can ask it towards the issuer, but he might tell me whatever I want to hear. so there's still a little challenge there to make that happen and on a technological part you need to make the bookings correctly so that everything that you're doing is auditable and can be reviewed so it's not something that you put in the book that doesn't exist I think in this case here you can trust one of two things you can either trust the license or you can trust the proof of reserve or in some issuers, both.

27:53So if you trust the license, it means that some supervisor, let's say some supervisor and regulator would require that your stablecoin issuer has one-to-one reserves and they would be doing the job of double-checking what's in their bank account, as you say, rather than you and you being the merchant or the retail, whomever, the holder, right? So that's the one source of trust. And the other source of trust, which kind of predates regulatory or licensing days, has been this concept of proof of reserves, which is for stablecoin issuers to make their reserves auditable and available to whomever wants to double-click on them.

28:40Yeah. And indeed, trusting the license means that you're trusting the auditors and all the organizations around that. And that's where I come from, where basically you need to prove operationally to these auditors that you got your ducks in a row and that you're actually doing the operations correctly. Ine, do you think we're going to see a proliferation of sort of stablecoin issuers and more and more stablecoins? Or are these points that Thierry and Dia are just sort of discussing about all the needs for reserve transparency and so on going to mean that actually a lot of merchants, a lot of corporations, a lot of individuals are going to end up just trusting two or three stablecoins or maybe even just one that they've become familiar with?

29:32Because a little bit like sort of brands, certain stablecoins will just become familiar and maybe a bit more trusted and lots of the other potential stablecoins will sort of get edged out. What do you think? I do believe actually there would be two, three, up to five max main dominant stable coins. Because we already see today on the market that USDC is at least three times has more volumes than EUR stable coins. and not mention that Turkish stable coins, even like much, much smaller than even euro volumes. So I do believe there are a few main dominant stable coins, for sure. And we're already seeing that so far the main players on the market who are going on China, Visa, PayPal, Stripe.

30:33None of them are European-based company from the headquarter perspective. Yet, several players, big players, like Worldline as well, they partner with FIPTO recently to enable next generation payment transactions with stablecoins. But it's still quite early stage. We do have in Europe, I'm just back from the Web Summit, and I met several interesting fintechs who are offering stablecoin payments. However, they are looking to add an alternative. They are looking to add credit cards because their merchants, their clients are still demanding all per liter of payments. So none of them want to end up just with one type of payments.