Stablecoins, digital tokens backed one-to-one by assets such as United States (US) dollars or government bonds, are emerging as credible instruments in banking and payments. They are increasingly used for cross-border settlement, liquidity management and remittances. Regulators have moved from questioning their legitimacy to defining how they should operate, signalling their integration into mainstream finance.

David Katz, vice president of strategy and policy for Asia Pacific at Circle, calls this a structural transition. Circle issues USD Coin (USDC), one of the most widely used stablecoins. “It changed the view of stablecoins from an ‘if’ to a ‘how’,” he said, noting that regulation and adoption are advancing together and enabling greater cooperation between policymakers and institutions.

Regulation validates Circle’s model

Formal regulation has embedded stablecoins within recognised financial systems. The European Union (EU) introduced its Markets in Crypto-Assets Regulation (MiCA) in 2024, followed in 2025 by the US Genius Act, the first federal law governing stablecoins. Several Asian jurisdictions have introduced or finalised national stablecoin regimes, such as Singapore, Hong Kong and Japan, but no comprehensive regional framework exists at present.

Katz says the Genius Act formalised Circle’s long-standing approach to transparency and reserve management. “In many respects, it enshrined into law the way we have been doing business since the outset,” he says. Circle states that it maintains one-to-one real-world asset backing, with reserves reportedly held in liquid instruments across several financial institutions. Approximately 90% of these reserves are held in a dedicated fund managed by BlackRock, custodied by the Bank of New York Mellon (BNY Mellon), marked to market, and verified through monthly independent audits.

“Every single token holder has an equal call on those reserves, wherever they sit. They are not Circle’s money; they are held for the benefit of token holders,” Katz says. He adds that the reserves operate as a single global pool that supports redemptions across markets, a concept that strengthens regulatory confidence in the model. Circle states that transparency, supported by public reporting and attestations, underpins its model and aligns with MiCA and Genius Act standards.

Convergence across global frameworks and the role of dialogue

The growing alignment of regulation across jurisdictions signals that stablecoins are now viewed as part of the financial system, not outside it. Katz notes, “Five years ago, there was almost no regulation on stablecoins. Today, we see robust frameworks across major jurisdictions.” This convergence has created a taxonomy built on full backing, transparency and redemption rights.

Circle’s experience under MiCA highlights the value of continuous engagement. “The big lesson is that ongoing engagement matters. Regulators need to understand how we operate, and we need to understand their priorities,” Katz says. Circle Internet Financial Europe SAS, its EU subsidiary, is officially licensed to issue electronic money under MiCA. Katz believes that this serves as a model for constructive supervision between regulators and industry.

In Asia, regulatory regimes are advancing. Singapore enforces same-currency reserve and licensing rules, Hong Kong introduced its Stablecoin Ordinance in 2025 requiring full backing and disclosure, and Japan maintains a framework allowing partial reserves in government bonds. Despite differing approaches, Katz notes a regional shift towards interoperable standards that enable cross-border value flows.

Interoperability becomes essential

With regulation advancing, the focus has shifted to how digital money types interact. Katz identifies interoperability as the next system challenge. Tokenised bank deposits, issued on blockchain rails as digital representations of deposits, are useful for treasury and bilateral flows but remain confined to closed systems. “They tend to be walled gardens. Bank B may not accept Bank A’s tokenised deposit and moving them outside the system creates capital treatment challenges,” he says.

He argues that stablecoins can complement bank-issued tokens by providing portability. “Because we are one-for-one fully asset-backed, we don’t have those issues. When banks need to move value outside their environment, converting to USDC allows transfers across institutions, markets and blockchains.” Stablecoins, he says, act as bridge assets that extend liquidity between otherwise isolated systems.

Building settlement infrastructure through Circle Payments Network and Arc

The next stage of stablecoin development depends on infrastructure that connects regulatory compliance with practical use. Circle has launched initiatives to enhance settlement efficiency and interoperability. The Circle Payments Network (CPN) acts as a coordination layer for high-friction payment corridors.

“Think of routes like Asia to Africa,” Katz explains. “Moving money there can be slow and costly, with trust issues between counterparties. CPN connects regulated entities at both ends, reducing settlement risk and improving the speed of flows.” According to Circle, more than 100 institutions had joined by August 2025, reflecting growing interest in digital settlement infrastructure.

Stablecoins operate on blockchain networks that record ownership and transactions on a shared ledger, creating a platform for faster and more transparent settlement. As adoption grows, Circle created its own blockchain, Arc, to manage this activity at institutional scale. “Most blockchains were not designed with stablecoins in mind. Arc is optimised for them from the outset,” Katz says. According to Circle, the network is designed to use USDC for transaction fees, support currency conversion between stablecoins and enable near-instant settlement. It includes privacy and regulatory access features intended for institutional use. Arc’s launch highlights how stablecoin networks are being developed to operate within regulated financial environments.

Circle’s technology stack integrates Arc at the base layer, CPN for settlement, Circle Mint for issuance and redemption, and USD Yield Coin (USYC), a tokenised money market fund that offers near-instant interchangeability with USDC. The company positions this structure as part of a scalable model for stablecoin-based finance.

Institutional adoption and the role of collaboration

The institutionalisation of digital money is accelerating as regulatory clarity and operational frameworks mature. “Clear rules unlock decisions,” Katz says. “Treasuries will migrate on chain, banks will use stablecoins alongside their own deposits, and payment networks will adopt them for clients and internal treasury operations.”

Regional pilots such as Singapore’s Project Guardian and the multi-jurisdictional Project mBridge are advancing tokenised asset and cross-border settlement models. These initiatives demonstrate how regulators and financial institutions are building the foundations for interoperable digital markets. Katz says this collaboration reflects a broader structural shift in finance, where public and private participants operate within the same digital ecosystem. “We see ourselves as complementary to banks, not in competition,” he says. “They have their role, and stablecoins add another layer. Together with regulators, it becomes a triangle of cooperation.”

The growing cooperation between banks, central banks and private issuers shows a shared recognition that programmability, continuous settlement and tokenisation are reshaping financial operations and creating opportunities for innovation across the digital money landscape.

Programmability and the next phase

Programmability marks the next phase of stablecoin development, allowing money to function as both medium and logic. It embeds rules into digital currency, enabling settlement when predefined conditions are met, such as delivery of goods or completion of milestones. Katz says, “The payments piece is important, but the real frontier is programmability. When you convert money into software, you can build conditional statements into it. That opens applications we cannot yet imagine.”

He points to potential uses such as automated supplier payments, escrow management and recurring settlements. These functions embed financial logic directly into enterprise systems, linking stablecoins to the broader field of programmable finance, where smart contracts enable conditional transactions within regulated frameworks.

From regulatory to capability

The development of stablecoins follows a clear progression: regulation, validation, interoperability and programmability. Circle expects continued growth in USDC supply and projects between $75 million and $85 million in additional non-issuance revenue by year-end, according to internal forecasts. “The Genius Act was a starting gun. Now it’s about more regulation, more adoption and innovation we cannot yet imagine,” Katz reflects.

Circle positions its reserve model as an example of how transparency and stability can be incorporated into digital money, and its interoperability projects aim to demonstrate how value could move more efficiently across networks. These initiatives align with a wider industry movement in which private issuers, financial institutions and regulators explore new models for digital value.

As stablecoins enter a regulated era, their impact will depend on how effectively the industry aligns with supervisory expectations and integrates with financial infrastructure. Circle presents one approach within this evolution, in which programmable and transparent money is being tested as part of institutional finance and emerging