1. MACRO VIEW#
The Bank of England has overhauled its systemic stablecoin framework by replacing individual holding caps with a centralized issuer limit. Under the newly published draft code of practice, the central bank will abandon proposed £20,000 personal holding limits in favour of an initial £40 billion aggregate issuance cap per systemic stablecoin. Additionally, the BoE has relaxed reserve requirements, lowering the mandatory, unremunerated cash deposit ratio at the central bank from 40% to 30% of reserves. Source: Bank of England systemic stablecoin caps and The Block’s coverage.
United States regulatory agencies have exempted secondary market transactions from incoming stablecoin customer verification mandates. A joint proposal by FinCEN, the Federal Reserve, the OCC, the FDIC, and the NCUA outlines Customer Identification Program (CIP) requirements for Permitted Payment Stablecoin Issuers (PPSIs) under the federal GENIUS Act. This framework restricts the verification burden strictly to entities with a direct primary relationship with the issuer, leaving smart contract-driven secondary transactions out of scope.
The Hazel Network has resolved the walled-garden limitation of commercial bank deposit tokenisation by engineering a hybrid token architecture. Launched on the Ethereum mainnet by Vantage Bank and Custodia Bank, the network utilises a unified token that operates as a tokenised deposit within the bank consortium but morphs into a reserve-backed stablecoin when transferred to external non-bank wallets. This eliminates the necessity of traditional mint-and-redeem actions across segregated ledgers.
The Bank for International Settlements warns that activity-based stablecoin yield models introduce severe counterparty risks to the financial system. According to a BIS Bulletin, interest prohibitions under the European Union’s MiCA framework disproportionately target low-risk “reserve-based” yield models, such as Coinbase’s USDC cash-management yields. Conversely, highly volatile “activity-based” models, which depend on commingled exchange lending operations, remain largely unsegregated and expose holders to severe counterparty default risk.
Global central banks are systematically deprioritising retail digital currencies to focus resources on tokenised wholesale infrastructure. The Atlantic Council’s May 2026 CBDC Tracker reveals that advanced economies like Canada, Australia, and Norway have retreated from retail projects, redirecting capital to wholesale initiatives. Concurrently, cross-border wholesale networks have more than doubled since 2022, led by mBridge, which has seen settlement volumes surge 2,500-fold to $55.49 billion.
The market for short-duration Treasury-backed money market funds is saturating as major asset managers compete for stablecoin reserve assets. Following Fidelity Investments’ launch of the Fidelity Reserves Digital Fund, nearly all Tier-1 global custodians, including State Street and J.P. Morgan, now offer dedicated vehicles compliant with the GENIUS Act. These funds are locked in intense fee compression, with expense ratios converging tightly between 0.17% and 0.18% due to strict statutory maturity limits of 93 days or less.
2. CORE PILLAR DEVELOPMENTS#
- Banking Infrastructure & Commercial Rails: The Bank of Korea has progressed its CBDC deposit token initiative to its second phase, focusing on the direct integration of tokenised commercial liabilities into existing legacy bank infrastructure. Simultaneously, South Korea’s Toss Bank is partnering with Solana to deploy a proof-of-concept for cross-border stablecoin remittances and payments. In South Africa, the South African Reserve Bank (SARB) is modernising its SAMOS Real-Time Gross Settlement (RTGS) system to support fast retail payments and wholesale digital asset settlement, explicitly bridging central bank reserves with private-sector distributed ledgers.
- Institutional Asset Management & RWAs: Sovereign asset tokenisation and reserve management have advanced with the launch of the Fidelity Reserves Digital Fund, a money market fund engineered specifically for stablecoin issuers to meet the strict liquidity mandates of the US GENIUS Act. In Europe, Boerse Stuttgart’s settlement engine Seturion has partnered with Weltix and BlockInvest—backed by UniCredit and Crédit Agricole—to establish an end-to-end distributed ledger settlement solution. Seturion utilised Germany’s Trigger solution in Eurosystem wholesale DLT settlement trials and has applied for a DLT Pilot Regime licence to operate pan-European commercial rails.
- Sovereign Infrastructure & CBDCs: Wholesale monetary infrastructure is scaling rapidly through institutional initiatives such as the Federal Reserve Bank of New York’s Project Agorá, the European Central Bank’s Project Pontes, and Brazil’s tokenised credit pilot, Drex. Highlighting systemic shifts in public money, the People’s Bank of China has reclassified the e-CNY digital yuan as a deposit liability rather than physical cash in circulation. Additionally, mBridge has emerged as the dominant cross-border settlement vehicle with cumulative volumes reaching $55.49 billion, of which the e-CNY handles 95% of total value.
- Regulatory & Legal Frameworks: The regulatory perimeter around digital liabilities has solidified as US agencies propose strict Customer Identification Program requirements for stablecoin issuers under the GENIUS Act. Compliance timelines are driving institutional pivots, evidenced by Tether’s launch of USAT, a separate US-regulated stablecoin utilising Anchorage Digital Bank as issuer and Cantor Fitzgerald as reserve custodian. Concurrently, European central bankers are leveraging the enforcement of the Markets in Crypto-Assets Regulation (MiCAR) to mandate compliance for interest-bearing stablecoins while accelerating plans for the digital euro to protect sovereign payment systems.
3. STRUCTURAL & OPERATIONAL PAIN POINTS#
- Interoperability Silos: Tokenised bank deposits remain fundamentally constrained by a “walled garden” operational model, wherein assets cannot be cleanly transferred beyond the proprietary ledger or consortium of participating institutions. While initiatives like the Hazel Network attempt to bridge this divide by morphing deposits into stablecoins, the underlying infrastructure lacks a native, standardised interoperability protocol across global commercial banking networks.
- Balance Sheet & Liquidity Friction: Analysis of the US GENIUS Act reveals a major regulatory money creation gap: if stablecoin issuance does not displace aggregate bank deposits but instead shifts them to intermediary reserve banks, the resulting secondary circulation amounts to unsanctioned credit expansion. Furthermore, the Bank of England’s mandate that systemic stablecoin issuers must hold 30% of their reserves as unremunerated central bank deposits penalises issuer balance sheets, creating severe liquidity drag during high-yield macroeconomic regimes.
- Post-Trade Plumbing Constraints: Post-trade efficiency is restricted by the GENIUS Act’s strict reserve limits, which confine stablecoin reserves exclusively to Treasury instruments with maturities of 93 days or less, cash, and reverse repurchase agreements. This compressed maturity profile forces institutional custodians and asset managers into highly concentrated, low-yield cash management positions, increasing reinvestment friction and operational overhead across major post-trade digital registries.
4. NEW HIGH-SIGNAL TARGETS FOR TRACKING#
- GENIUS Act (US Federal Stablecoin Legislation) — Tracking incoming OCC and Federal Reserve rulemakings on stablecoin reserve custody.
- The Hazel Network — Monitoring the consortium’s Q4 2026 commercial rollout of its morphing deposit-stablecoin token.
- Seturion — Following Boerse Stuttgart’s settlement application under the pan-European DLT Pilot Regime.
- mBridge Project — Multi-central bank wholesale digital currency platform to track cross-border de-dollarisation and renminbi settlement share.
- Project Agorá — Under the Federal Reserve Bank of New York, exploring wholesale cross-border tokenised asset and CBDC settlements.