Stablecoin Issuance & Regulatory Compliance

Stablecoin Issuance & Regulatory Compliance Counsel

Stablecoins have moved from a back-office settlement curiosity to one of the most consequential product categories in financial services. Daily settlement volumes regularly exceed those of major card networks, market capitalization is measured in hundreds of billions of dollars, and a federal regulatory perimeter for payment stablecoins has finally taken shape through the GENIUS Act and parallel state regimes. John Montague, Esq. advises banks, trust companies, fintech operators, technology platforms, asset managers, and merchant users on the full stablecoin regulatory stack — from charter and licensing strategy through ongoing reserve, attestation, and AML compliance.

The legal architecture of a modern stablecoin program touches federal banking law, state money-transmitter regulation, securities and commodities law, BSA/AML, OFAC sanctions, consumer protection, and an emerging body of state and federal stablecoin-specific rules. The same project may need to satisfy the OCC for a federal trust charter, NYDFS for a BitLicense or limited-purpose trust, multiple state money-transmitter regulators, FinCEN for MSB registration, and the SEC or CFTC for any features that resemble investment returns. John’s practice combines deep digital-asset fluency with the corporate and regulatory training needed to coordinate this stack — informed by his accounting degree from Stetson University, his J.D. from the University of Florida Fredric G. Levin College of Law, and his years as an associate at Locke Lord LLP (now Troutman Pepper Locke), an AM Law 200 firm.

Why Stablecoin Issuance Requires Specialized Counsel

A stablecoin program is not simply “a token that targets one dollar.” The peg is supported by — and the legal analysis flows from — the underlying reserve structure, issuance and redemption mechanics, custody arrangements, attestation regime, and counterparty stack. A program backed by short-dated U.S. Treasuries held with a qualified custodian is a fundamentally different legal entity than an algorithmic stablecoin or a yield-bearing money-market-fund analog. Investors, partners, regulators, and counterparties all evaluate the program based on the legal substance of these arrangements, not the marketing.

Core Areas Where We Help

1. Charter, Licensing & Issuer Pathway Selection

Under the federal framework that has emerged through the GENIUS Act and parallel rulemaking, payment-stablecoin issuers must operate as one of several permitted entity types: insured depository institutions, federally chartered trust companies under OCC supervision, state-chartered banks or trust companies in approved jurisdictions, or federally non-bank issuers under a federal payment-stablecoin issuer designation. Each pathway has different capital requirements, supervisory expectations, geographic reach, and product latitude. We help clients evaluate which pathway fits the business model, prepare the application, and manage the supervisory relationship.

2. Reserve Composition, Custody & Bankruptcy Remoteness

The reserve is the heart of the program. We advise on permissible reserve assets (cash, overnight reverse repos, short-dated Treasuries, money-market fund interests), the segregation arrangements required to protect reserves from issuer insolvency, the qualified-custodian relationship, and the cash-management policies governing reinvestment and yield. Bankruptcy remoteness — the structural and contractual safeguards that ensure stablecoin holders can be made whole even if the issuer fails — is increasingly tested by both regulators and counterparties during diligence.

3. Attestation, Audit & Public Disclosure

Stablecoin issuers must publish regular attestations from a qualified public accountant covering reserve composition, segregation, and reconciliation to circulating supply. We advise on engagement of the attesting firm, the scope and frequency of attestations (monthly being the new baseline), the public disclosures around incidents and reserve composition changes, and the increasingly common requirement for a full annual audit. The attestation regime is one of the areas where stablecoin enforcement has historically been most active, and where program design choices have outsized regulatory consequences.

4. Issuance, Redemption & Whitelisted Counterparty Mechanics

The issuance and redemption stack — who can mint, who can redeem, on what terms, with what cut-off times, and through what onboarding process — defines both the legal character of the token and its commercial proposition. We draft the issuance agreement, redemption agreement, primary-market participant agreement (the stablecoin analog to an authorized-participant agreement for an ETF), and the policies that govern minting limits, blacklisting, freeze authority, and law-enforcement response. These mechanics interact with KYC, OFAC, and AML obligations and must be designed to be both operationally workable and legally defensible.

5. AML, OFAC & State Money Transmitter Compliance

Even within the new federal framework, stablecoin issuers and the businesses that move stablecoins must comply with BSA AML programs, OFAC sanctions screening (including wallet-level address screening, an area where enforcement has grown rapidly), and state money-transmitter requirements for non-bank entities operating outside the federal charter. We design AML programs, KYC procedures, sanctions-screening policies, and SAR filing protocols tailored to stablecoin operations — including the unique challenges presented by self-custodial wallets, bridges, and mixers.

6. Securities & CFTC Edge Cases

Most fiat-backed stablecoins are not investment contracts and are not securities. But many stablecoin-adjacent products are: yield-bearing stablecoins, money-market tokens with profit participation, algorithmic stablecoins with governance-token economics, and stablecoins issued by funds. We perform the Howey analysis for each product, advise on Investment Company Act exposure, and structure parallel offerings (a payment stablecoin and a separately sold investment-bearing analog) when both products are commercially required.

Practical Guidance for Stablecoin Programs

The successful stablecoin programs of the next cycle will be the ones that integrate legal architecture and product design from day one. Reserve composition cannot be a finance-team decision made after launch. Attestation cadence and disclosure protocols should be drafted before public statements about transparency are made. The relationship between the issuer, custodian, fund administrator, and attesting firm should be documented in commercial agreements that anticipate the regulator’s questions. And the issuer should engage proactively with its supervisor rather than waiting for an examination — programs that build a constructive supervisory relationship enjoy materially more product flexibility than those that don’t.

Frequently Asked Questions

Can a non-bank fintech issue a payment stablecoin?

Under the GENIUS Act and parallel rulemaking, a federal designation pathway for non-bank stablecoin issuers exists alongside the bank, trust, and state-charter pathways. Each pathway carries different capital, custody, attestation, and supervisory requirements. The right pathway depends on the issuer’s size, geographic reach, product scope, and capital base.

Are stablecoins securities?

A pure payment stablecoin — fully reserved with cash or short-dated Treasuries, redeemable 1:1, with no profit participation or yield to holders — is generally not a security under U.S. law. Yield-bearing stablecoins, money-market token products, and algorithmic stablecoins frequently raise securities questions that must be addressed before launch.

What attestation cadence is required?

Monthly attestation by a qualified public accountant covering reserve composition and 1:1 backing is the emerging market baseline and is required by several supervisory frameworks. Annual audits are increasingly required as well. We work with issuers to engage the attesting firm and structure the engagement to meet supervisory expectations.

What about non-U.S. stablecoin programs?

Non-U.S. issuers face their own frameworks — MiCA in the EU, MAS in Singapore, VARA in Dubai, the FCA’s emerging regime in the U.K., FINMA in Switzerland, and the Hong Kong SFC. Programs intending to reach U.S. holders generally must also comply with U.S. requirements regardless of where the issuer is chartered. We coordinate with local counsel on cross-border program design.