What we mean by USD1 stablecoins

Throughout this page, USD1 stablecoins means any digital token that seeks to maintain a one‑to‑one exchange value with U.S. dollars through a formal redemption commitment and the maintenance of reserve assets (cash or cash‑like instruments) held by an issuer or trustee. In plain English: a token you can redeem for one U.S. dollar per token, subject to the issuer’s terms.

The definition above deliberately avoids brands and tickers. It aligns with how international bodies discuss “stablecoins” (a common market term, not a legal classification), including the Financial Stability Board’s high‑level recommendations for so‑called global stablecoin arrangements and their emphasis on redemption, governance, reserve quality, and disclosures.[1] Central bank research highlights that private dollar‑linked tokens differ from money issued by central banks, and stresses issues like the “singleness of money” (one unit of money has the same value everywhere), “elasticity” (the ability of money to expand and contract with demand), and “integrity” (guardrails against illicit finance and operational failure).[2]

Two related phrases you may see:

  • Stablecoin arrangement (the entire ecosystem around a token, including issuer, reserve custodian, wallet providers, and transfer mechanisms). Regulators sometimes apply standard infrastructure principles to these arrangements, especially when they are widely used.[3]
  • E‑money token in the European Union (a MiCA category for tokens referencing a single fiat currency and offering par redemption), and asset‑referenced token for tokens pegged to a basket of assets. Stablecoin rules for these EU categories began to apply in mid‑2024, with the rest of the regime phased in by late‑2024.[4][5]

This page is written for treasurers, controllers, legal and compliance leaders, and engineering partners who want a pragmatic, hype‑free reference for working with USD1 stablecoins inside a modern treasury function.

Why a treasury team would care

A treasury team’s mission is to protect liquidity, enable payments, and manage risk. USD1 stablecoins can be relevant in four common scenarios:

  1. Faster settlement across fragmented banking hours. Transfers between on‑chain wallets are near‑instant and final once confirmed (meaning the transaction is recorded on a distributed ledger and cannot be reversed without consent), so they can complement wire and instant rails for time‑sensitive flows.

  2. Cross‑border payouts or collections. For counterparties with limited access to U.S. dollar accounts, USD1 stablecoins can lower friction relative to correspondent banking chains. European central bank analysis notes their growing use as a settlement asset in digital markets, while warning that integration with traditional systems and counterparty dependencies introduces risks that treasurers must actively manage.[11]

  3. On‑chain commerce. If your products or services settle on programmable rails (for example, tokenized marketplaces or on‑chain invoices), USD1 stablecoins are often the unit of account among participants.

  4. Operating continuity. When payment service providers face outages or cutoffs, USD1 stablecoins can provide a redundant path for urgent, verified payments—subject to the same compliance controls you would apply to wires.

Treasurers should take a balanced view. Central‑bank research makes clear that private tokens pegged to fiat can “fare poorly” against those tests of singleness and elasticity at system scale, especially without robust guardrails.[2] That is not a reason to ignore the instrument; it is a reason to structure policies, controls, and counterparty due diligence with the same seriousness you apply to bank accounts and cash‑pooling.

A risk lens specific to treasury

Issuer risk (redemption and reserves). Read the legal terms around redemption timing, fees, and conditions. Regulatory guidance in New York, for example, requires U.S. dollar‑backed tokens issued under state oversight to provide timely redemption at par, maintain high‑quality reserves, and support regular independent attestations of those reserves.[6] International recommendations echo this focus on effective stabilization, robust governance, disclosures, and recovery plans.[1]

Operational risk (wallets, keys, and processes). On‑chain transfers are push‑payments. If you mis‑address a transaction, there is no routine way to recall it. Strong key‑management and approval workflows are business‑critical. The NIST key‑management canon remains the reference for generating, storing, rotating, and retiring cryptographic keys in enterprise systems.[14]

Legal and compliance risk. U.S. sanctions rules apply to digital assets the same as to dollars in a bank account. OFAC has published industry‑specific guidance, and U.S. AML rules require that covered businesses implement risk‑based programs; FinCEN has confirmed the application of its money‑transmitter rules to many digital‑asset business models and has longstanding recordkeeping and “Travel Rule” obligations for certain transfers.[7][8][9][10]

Liquidity and market structure risk. Even fully reserved tokens can exhibit price dislocations on some venues during stress or in jurisdictions with restricted convertibility. BIS analysis highlights a structural tension between promising constant par convertibility and maintaining a profitable business model; treasurers should assume that redemptions depend on issuer operations and reserve liquidity, not just code.[2]

Banking and prudential context. The Basel Committee’s crypto‑asset standard sets conditions for banks that hold or are exposed to stablecoins, including tests tied to reserve asset quality and redemption mechanics; these rules influence bank appetite and terms for reserve and settlement services that your company may rely on.[19]

A practical policy blueprint

A documented treasury policy for USD1 stablecoins should fit on a few pages, be approved by management and directors, and be auditable. In clear language, it should:

  • State purpose and scope. Describe the business needs that justify using USD1 stablecoins (for example, specific payments or collections), the allowed entities, and the counterparties you will work with (exchanges, payment processors, liquidity providers).

  • Define eligible instruments and chains. Name the permitted token types and the specific public networks on which you will operate. Treat chains as you would bank jurisdictions: allowlisted, reviewed annually, and removable if conditions change. Draw on international guidance that treats certain stablecoin arrangements like market infrastructure for oversight purposes.[3]

  • Set clear concentration and size limits. Establish maximum balances per issuer, per chain, and per counterparty wallet. Define minimum on‑chain confirmations before a receipt is considered settled for operational purposes.

  • Document redemption paths. Specify approved redemption channels (for example, direct with the issuer or via a regulated intermediary), expected settlement timeframes, and emergency contacts. Where regional rules apply—such as MiCA’s regime for e‑money tokens—note any special requirements that affect timelines and disclosures.[4][5]

  • Embed controls and segregation of duties (separation of responsibilities to reduce errors and fraud). Separate initiators, approvers, and broadcasters. Require dual or multi‑control for production wallets. Align with familiar control frameworks used by auditors.[16][17]

  • Mandate recordkeeping and reporting. Define what evidence is captured for each transfer (for example, blockchain transaction reference, invoice, counterparty screening), how it is retained, and how reconciliations are performed.

  • Establish incident response. Cover lost keys, suspected compromise, mis‑sent funds, and sanctions hits. Name the escalation tree and outside counsel.

  • Review cadence. At least annually, or upon material regulatory or product change.

This policy should read like the rest of your treasury playbook. If an auditor or board member with no crypto background can understand what will happen and why, you are on the right path.

Selecting issuance and chain channels

When you evaluate where and how to hold and move USD1 stablecoins, consider three interlocking choices: the issuer, the reserve and redemption mechanics, and the public network.

Issuer and legal terms. Focus on redemption rights, fees, and carve‑outs. In New York, the state supervisor’s guidance sets out requirements on redeemability, reserve management, and independent attestations for U.S. dollar‑backed tokens issued under its oversight.[6] In the European Union, MiCA applies authorisation, own‑funds, liquidity, stress‑testing, and disclosure obligations to issuers of e‑money tokens and asset‑referenced tokens, with technical standards issued by EU authorities such as the EBA.[4][20]

Reserve assets and disclosures. Look for frequent, independent assurance over reserve composition and segregation. The FSB’s international recommendations emphasise robust governance, risk management, and disclosure templates that make reserve assets transparent.[1]

Public network characteristics. Treat a chain like a settlement system you do not operate. Review uptime history, typical confirmation times, mempool dynamics, congestion fees, and tooling maturity. The CPMI‑IOSCO application of infrastructure principles to stablecoin arrangements highlights operational resilience and participant risk management as core expectations once usage becomes systemic.[3]

Bank connectivity. If a bank holds reserves or provides redemption corridors, note the prudential environment that bank faces. Basel’s work on crypto‑asset exposures can influence a bank’s internal limits and terms for stablecoin‑related services.[19]

Custody, wallet architecture, and key management

Treasury custody design is about preventing single‑point failures while preserving operational agility. In practice, most teams adopt a layered model:

  1. Settlement wallets (for day‑to‑day payables and receivables). Use hardware‑backed keys with strong multi‑control. Limit balances to working capital needs.

  2. Treasury reserve wallets (larger balances, slower movements). Require higher approval thresholds and additional authentication measures.

  3. Cold or near‑cold storage (offline or restricted connectivity). For strategic balances that do not need frequent movement.

Key management. Whether you use multi‑signature (a scheme that requires multiple approvals to authorize a transaction) or MPC (multi‑party computation, which shards a secret among several devices or teams), align procedures with NIST guidance on entropy, key establishment, rotation, backup, and destruction.[14] Document who can generate keys, where key shards are kept, how recoveries are tested, and how device lifecycle is managed.

Vendors and auditors. If you rely on custodians or wallet‑as‑a‑service providers, request SOC 2 or comparable reports aligned to the AICPA Trust Services Criteria (security, availability, processing integrity, confidentiality, privacy).[15] Ensure your engagement letters describe how your assets are segregated and what happens if the provider becomes insolvent.

Approvals and logging. Route every movement through a human‑readable approval and logging system that captures: purpose, amount, destination, chain, transaction reference, and links to supporting documentation. Provide read‑only access to controllers and auditors.

Day‑to‑day operations and reconciliations

Treasury operations with USD1 stablecoins should feel as disciplined as wires:

  • Counterparty verification. Before first payment, collect legal names, tax identifiers where applicable, and wallet address attestations. Apply sanctions screening at onboarding and at each payment. OFAC’s guidance expects risk‑based controls that consider on‑chain specifics.[7]

  • Payment formatting. For each transfer, store the destination wallet address, chain, and any memo or reference that your counterparty requires. Treat such references like invoice fields for later reconciliation.

  • Batching. If you batch payables, ensure you can still trace each payment to an invoice. Many teams generate a unique internal reference per payable and include it in their ledger and payment request.

  • Receivables. For collections, assign unique deposit addresses or reference tags per customer or invoice to avoid ambiguous receipts.

  • Reconciliation. Automate retrieval of on‑chain transactions and balances from your wallets of record. Reconcile to your sub‑ledger daily, with a second person reviewing exceptions.

  • End‑of‑period close. For any non‑trivial balances at period end, capture a snapshot of wallet holdings and price references (if fair value is relevant under your accounting policy; see below). Retain independent evidence in your workpapers.

Compliance: AML, sanctions, and reporting

AML program. If your activities fall within regulated money‑services or other financial‑crime obligations, design and document a risk‑based program covering KYC (customer due diligence), transaction monitoring, investigations, and reporting. FinCEN’s 2019 guidance explains how U.S. AML rules apply to common digital‑asset business models; many intermediaries that convert or transmit value are considered money transmitters and must register and implement programs.[8]

Recordkeeping and the Travel Rule. U.S. rules require covered financial institutions to collect and transmit specific originator and beneficiary information for qualifying funds transfers. Regulators have clarified that these obligations apply to both bank and non‑bank institutions; they sit alongside recordkeeping requirements, with detailed rule references in Title 31 of the Code of Federal Regulations.[9]

Sanctions. OFAC’s brochure for the virtual currency industry describes screening expectations, geolocation controls, and processes for promptly responding to potential matches.[7] Your sanctions procedures should also address the realities of on‑chain transfers, such as the risk of interacting with blocked addresses and the need to block or reject transactions as required.

Global standards. The FATF has updated its guidance for virtual assets and service providers, including specific commentary on how its standards apply to stablecoins and how to implement the Travel Rule across jurisdictions.[10] If you operate in the European Union, MiCA overlays issuer and service‑provider obligations; treat these as complementary to AML standards rather than substitutes.[4][5]

U.S. tax reporting touchpoints. The IRS treats digital‑asset transactions as taxable events in many common cases, and has stepped up information reporting requirements for brokers, including a dedicated form for digital assets. Even if you are not a broker, your general tax obligations (for example, recognizing income when you receive USD1 stablecoins as consideration) remain in scope.[12]

Accounting, audit, and tax

Accounting for USD1 stablecoins depends on jurisdiction and on the token’s legal rights.

U.S. GAAP. The FASB issued ASU 2023‑08, which moved many crypto assets into a fair‑value model with changes in profit and loss. However, the scope explicitly excludes assets that provide the holder with enforceable rights to or claims on underlying goods, services, or other assets.[13] Many fiat‑redeemable tokens include such a right by design (redeemable at par from the issuer). That means USD1 stablecoins often sit outside this specific ASU, and entities must evaluate other GAAP for classification and measurement. Work with your auditors to assess whether your holdings meet definitions of financial assets, cash equivalents, or other categories, and to determine appropriate presentation and disclosure.

IFRS. The IFRS Interpretations Committee has concluded that holdings of cryptocurrencies are generally accounted for either as intangible assets under IAS 38 or as inventory under IAS 2 if held for sale in the ordinary course of business, and that they are not cash or cash equivalents.[18] While the agenda decision addressed cryptocurrencies broadly rather than fiat‑redeemable tokens specifically, many IFRS reporters analogize to that reasoning unless a token clearly meets the definition of a financial asset. Again, document your judgement and disclose key assumptions.

Audit readiness. Be prepared to show auditors robust custody and control evidence: access logs, approval workflows, reconciliations, and independent confirmations. External assurance reports from your custody vendor (for example, SOC 2) can support assessment of controls relevant to security and availability.[15]

Tax. In the United States, the IRS states that income related to digital assets is taxable, and that taxpayers must answer digital‑asset questions on returns. New information reporting rules for brokers are phasing in; even where you are not a broker, payments received in USD1 stablecoins are typically treated as income at fair value at receipt.[12] Consult local rules outside the United States, which vary.

Liquidity, redemption, and market microstructure

Even when a token is fully reserved, treasurers should plan for friction:

  • Redemption windows. Understand cutoffs and settlement calendars. Some issuers redeem same‑day, others next‑day; some require specific channels for redemption requests. New York’s guidance emphasises timely redemption; your contracts should make timelines explicit.[6]

  • Venue dynamics. On lightly traded venues or during stress, prices can deviate from par. BIS research discusses how stablecoins can trade at varying exchange rates across platforms, which undermines the singleness of money in a banking sense.[2]

  • Banking interdependencies. Reserve accounts live at banks subject to prudential rules and supervisory expectations, including Basel standards on crypto‑asset exposures. Those standards can affect how readily banks offer services that your redemption path relies on.[19]

  • Operational bottlenecks. On‑chain congestion can delay settlement; build retry logic and alternate chains into your playbooks where policy permits.

Practical mitigant: never rely on a single redemption route. Maintain at least two fully tested pathways (direct issuer redemption and a secondary regulated liquidity provider) and ensure vendor agreements permit rapid changes.

Cross‑border and multi‑entity considerations

Cross‑border usage intersects with currency controls, tax rules, and AML obligations. Align treasury with legal and compliance on:

  • Permitted uses. Some jurisdictions restrict corporate use of digital assets for settlement. Keep a maintained register by entity and country.

  • Travel Rule coverage. For cross‑border transfers, ensure your intermediaries can exchange required originator and beneficiary data with their peers. FATF’s updates and monitoring reports show uneven implementation; build for mismatches.[10]

  • EU specifics. Under MiCA, issuers of e‑money tokens and asset‑referenced tokens face authorisation, own‑funds, and liquidity requirements, with technical standards and supervisory roles split across EU bodies; if you operate in the European Union, keep your compliance map current.[4][5][20]

How USD1 stablecoins compare to tokenized deposits

USD1 stablecoins are private instruments redeemable with an issuer; tokenized deposits are digital representations of a claim on a bank deposit. Central‑bank research and projects like the BIS’s Agorá initiative explore tokenized deposits that interoperate with tokenized central‑bank money for programmable settlement while maintaining the two‑tier monetary structure.[21][22] For treasurers, the day‑to‑day comparison is simple:

  • Issuer and legal nature. A tokenized deposit is a direct claim on a regulated bank under deposit law; USD1 stablecoins are a claim under the issuer’s terms and applicable regulation.

  • Prudential and deposit insurance. Deposits sit within familiar prudential and insurance frameworks; stablecoins rely on reserve quality and redemption mechanics rather than deposit insurance.

  • Programmability and reach. Both can be programmable; USD1 stablecoins are widely usable across public networks today, while tokenized deposits are typically offered on permissioned or bank‑linked networks.

Treasurers do not need to pick one rail forever. Many will use both, driven by counterparty coverage, operational needs, and regulatory comfort in each region.

An illustrative treasury operating model

Here is a concise, real‑world model that many teams adopt and then tailor:

1) Governance and setup

  • Approvals: board or leadership sign‑off on the policy for USD1 stablecoins.
  • Counterparties: shortlist and due‑diligence of issuers, redemption agents, and custody vendors.
  • Chains and addresses: allowlist networks; generate wallets with documented key ceremonies and access logs.

2) Payables

  • Intake: invoices captured in the ERP with a required field noting whether payees can accept USD1 stablecoins.
  • Screening: counterparty screening and document checks at onboarding; address screening at each payment.
  • Initiation and approval: initiator uploads the request; two approvers sign; broadcaster submits on‑chain.
  • Evidence: store the transaction reference alongside the invoice in your sub‑ledger.

3) Receivables

  • Assignment: unique deposit addresses or reference tags per customer to keep collections unambiguous.
  • Monitoring: alerting for incoming transfers, matching to open invoices, and exception workflows for short‑pays or over‑pays.

4) Liquidity and treasury

  • Limits: cap per‑issuer and per‑chain balances; sweep excess funds to bank accounts through redemption according to a set schedule.
  • Stress testing: at least quarterly, test redemptions at size via both primary and secondary routes; document timings.

5) Close and audit

  • Snapshots: capture end‑of‑period holdings and reconcile to your sub‑ledger.
  • Disclosures: prepare fair‑value or other required disclosures according to your accounting policy; maintain workpapers to support auditor sampling.

Final readiness checklist for leaders and boards

  • We have a formal policy for USD1 stablecoins with clear purpose, limits, and approvals.
  • Our wallets are layered (settlement, reserve, cold) with strong key‑management that follows recognized guidance.[14]
  • We have documented redemption routes, tested at realistic sizes, with at least one independent secondary path.
  • Compliance controls include AML, sanctions, and recordkeeping aligned with applicable rules, and we understand Travel Rule obligations.[7][8][9][10]
  • Accounting and tax treatments are agreed with auditors and tax advisors, with disclosures ready where relevant.[13][18][12]
  • We monitor regulatory developments in our operating regions, including EU MiCA timelines and prudential changes that affect banking partners.[4][5][19]

Sources

  1. Financial Stability Board, “High‑level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements,” final report (July 17, 2023). FSB PDF.[1]

  2. Bank for International Settlements, Annual Economic Report 2025 — “The next‑generation monetary and financial system” chapter (June 24, 2025). BIS page.[2]

  3. CPMI‑IOSCO, “Application of the Principles for Financial Market Infrastructures to stablecoin arrangements” (July 13, 2022). CPMI page.[3]

  4. European Union, Regulation (EU) 2023/1114 (MiCA) — Official Journal entry (May 31, 2023). EUR‑Lex.[4]

  5. European Union, “European crypto‑assets regulation (MiCA) — summary and application dates” (Sept. 25, 2024). EUR‑Lex summary.[5]

  6. New York State Department of Financial Services, “Guidance on the Issuance of U.S. Dollar‑Backed Stablecoins” (June 8, 2022). NYDFS.[6]

  7. U.S. Department of the Treasury, Office of Foreign Assets Control, “Sanctions Compliance Guidance for the Virtual Currency Industry” (Oct. 15, 2021). OFAC PDF.[7]

  8. FinCEN, “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies,” FIN‑2019‑G001 (May 9, 2019). FinCEN PDF.[8]

  9. Board of Governors of the Federal Reserve System, “Threshold for the Requirement to Collect, Retain, and Transmit Information on Funds Transfers and Transmittals of Funds” (Oct. 23, 2020). Federal Reserve PDF.[9]

  10. Financial Action Task Force, “Updated Guidance for a Risk‑Based Approach to Virtual Assets and VASPs” (Oct. 2021). FATF PDF.[10]

  11. European Central Bank, “From hype to hazard: what stablecoins mean for Europe” (July 28, 2025). ECB blog.[11]

  12. Internal Revenue Service, “Digital assets” portal (updated June 20, 2025). IRS.[12]

  13. Financial Accounting Standards Board, ASU 2023‑08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350‑60): Accounting for and Disclosure of Crypto Assets (Dec. 2023). FASB PDF.[13]

  14. National Institute of Standards and Technology, SP 800‑57 Part 1 Rev. 5, Recommendation for Key Management (May 2020). NIST PDF.[14]

  15. AICPA‑CIMA, “SOC 2 — SOC for Service Organizations: Trust Services Criteria overview.” AICPA page.[15]

  16. Office of the Comptroller of the Currency, Interpretive Letter 1172, “Authority to hold deposits as reserves for certain stablecoins” (Sept. 21, 2020). OCC PDF.[16]

  17. Office of the Comptroller of the Currency, Interpretive Letter 1174, “Use of independent node verification networks and stablecoins for payment activities” (Jan. 4, 2021). OCC PDF.[17]

  18. IFRS Interpretations Committee, “Holdings of Cryptocurrencies — Agenda Decision” (June 2019). IFRS PDF.[18]

  19. Basel Committee on Banking Supervision, “Cryptoasset standard amendments” (2024) — revisions to SCO60 on stablecoins and disclosures. BCBS PDF.[19]

  20. European Banking Authority, “Asset‑referenced and e‑money tokens (MiCA): regulatory technical standards and guidelines” (various 2024‑2025). EBA page.[20]

  21. BIS, “Project Agorá: central banks and banking sector embark on new project to improve cross‑border payments” (Apr. 3, 2024). BIS press.[21]

  22. BIS Innovation Hub, “Project Agorá overview” (2024). BIS IH page.[22]