Stablecoins are the lifeblood of modern crypto markets. They serve as a bridge between traditional and decentralized finance, powering on-chain liquidity and providing traders, protocols, and institutions with a familiar unit of account. But beneath their widespread adoption lies a critical and often overlooked question:
Who regulates stablecoins, and what happens if they are not regulated?
As the crypto space embraces tokenized real-world assets (RWA) and stablecoins, particularly with the rise of yield-bearing stablecoin adoption, which saw its market cap surge by over 583% in 2024, and targets institutional growth, this question becomes central to how we build trust, structure risk, and design resilient financial infrastructure.
The Illusion of Stability
Many well-known stablecoins today are backed by fiat reserves, enjoy deep liquidity, and are integrated across hundreds of protocols. However, popularity is not the same as transparency, and liquidity does not guarantee regulatory protection.
In 2023, S&P Global published the ‘Stablecoin Stability Assessment’, evaluating a list of leading stablecoins based on asset quality, including credit, market, and custody risks, alongside overcollateralization and liquidation safeguards.
The assessment noted that while some stablecoin issuers comply with financial crime reporting requirements, they are not regulated or supervised by any major financial authority. There is also limited public information about whether their reserves are segregated or how they’re insulated from the issuer’s broader corporate risk, including exposure to unrelated ventures or bankruptcy.
These vulnerabilities aren’t theoretical.
In one widely known collapse, TerraUSD (UST), relying solely on algorithmic mechanics and no real reserves, failed in 2022 and lost $18.6 billion in market value. Its collapse revealed the fragility of pure market-driven stability when not anchored by real assets or regulatory guardrails.
Even stablecoins with fiat reserves and strong reputations briefly lost their peg in 2023, when part of their backing was held in centralized bank deposits not covered by insurance. The incident exposed how a lack of asset segregation and uncertainty about the accessibility of reserves compromised stability, triggering a depeg in secondary markets.
A crypto-backed stablecoin experienced a sharp depeg in 2025 as its underlying collateral lost its value due to a change in its protocol design. At the same time, newer stablecoins backed by volatile crypto derivatives have introduced additional concerns. These models remain largely untested under sustained stress and rely on complex mechanics that could behave unpredictably in adverse conditions.
These examples highlight real-world risks in stablecoins and the importance of mitigating these risks, especially as stablecoins evolve beyond trading tools on CEX and DEX into foundational financial infrastructure such as payments. The risk is just as relevant to the rapidly growing tokenized RWA space, which is projected to surpass $17 trillion in market size in 2033.
While these issues often remain hidden or overlooked in bull markets or times of stability, under market stress, trust can collapse quickly, and unregulated issuers can leave users with little recourse.
Regulation Is No Longer Optional: A Global Shift in Stablecoin Oversight
Over the past year, the regulatory landscape for stablecoins has shifted decisively. Authorities across major jurisdictions are formalizing frameworks to ensure that the assets backing stablecoins and tokenized real-world assets (RWA) are secure, accessible, and legally protected from issuer failure.
What was once peripheral is now central. In Europe, Asia, and North America, financial regulators are actively defining the standards to determine which digital assets can operate at scale and which cannot.
Earlier in 2025, the United States introduced two stablecoin bills: the STABLE Act and the GENIUS Act. While both bills outlined the framework for how stablecoins will be regulated, they differ in their approach to reserve requirements, government oversight, and stablecoin issuer requirements.
For example, both Acts require issuers to have 1:1 reserve backing and monthly reserve disclosures. However, the STABLE Act requires reserves in approved assets, while the GENIUS Act allows greater flexibility in reserve composition.
The bills have yet to be enacted into law, but they signal growing momentum toward establishing a federal regulatory framework.
In the European Union, the MiCA regulation is fully live, requiring stablecoin issuers to obtain e-money licenses, maintain fully backed reserves, and meet daily redemption and disclosure obligations. Non-compliant tokens risk delisting from regulated platforms.
In Asia, Singapore’s MAS supports compliant innovation through licensing and sandbox frameworks, while Hong Kong’s Stablecoins Bill, introduced in late 2024, mandates issuer licensing, marketing restrictions, and investor protections. Meanwhile, countries like Japan, Switzerland, and the UAE are rolling out tailored frameworks aimed at institutional adoption, cross-border payments, and on-chain finance.
The message is clear: regulatory compliance is no longer optional. It’s becoming a baseline requirement for global access, liquidity, and trust.
A Look at Regulated Alternatives: The Case of USDO
While many stablecoins lack clear safeguards or regulatory accountability, USDO takes a fundamentally different approach. It’s a yield-bearing stablecoin built from the ground up with legal resilience and regulatory compliance at its core.
USDO, a regulated yield-bearing stablecoin, is issued by OpenEden Digital, which operates under a Digital Asset Business license from the Bermuda Monetary Authority (BMA)—a reputable regulator with stringent oversight standards. The token issuer is also structured as a Segregated Accounts Company (SAC), a legal framework designed to separate user assets from the issuer’s operating risks.
For users, this translates into meaningful protection:
- Segregated assets: The assets backing USDO are legally and operationally separated from the issuer’s corporate accounts.
- Bankruptcy protection: If the issuer becomes insolvent, USDO’s reserves remain protected and its holders retain full redemption rights.
- Regulatory oversight: The BMA enforces capital, operational, and reporting requirements, along with extensive risk management policies, that foster a higher level of trust for users and partners.
This is not a regulatory afterthought. It is infrastructure intentionally built for security, transparency, and long-term credibility. These qualities are essential for stablecoins to gain trust and traction in mainstream finance.
What is a Yield-Bearing Stablecoin?
The rise of yield-bearing stablecoins—those backed by tokenized real-world assets like U.S. Treasuries—has redefined what stablecoins can do. No longer just passive, price-pegged instruments, they now offer real-world yield while maintaining stability.
USDO is a demonstrated use case of how stablecoins can evolve beyond passive utility, with the added regulatory oversight. With its backing assets of tokenized U.S. Treasuries, USDO delivers the yield from its backing assets directly to holders. No staking, no lockups, no claiming required as yield accrues automatically in users’ wallets through programmatic distribution.
This model of USDO transforms stablecoins from static collateral into safe yield-generating assets. With its full DeFi composability, USDO can be integrated into DeFi protocols for lending, liquidity provision, and yield trading without compromising on security or compliance. With transparent, on-chain reserves and full integration across DeFi protocols, USDO functions not just as collateral but as an active financial primitive.
As regulation gains clarity globally and RWA in crypto grows, yield-bearing stablecoins like USDO represent the next chapter of digital money: productive, programmable, and built on verifiable trust.
Closing
Contrary to the common perception that regulation stifles crypto innovation, clear stablecoin and tokenized RWA regulations might be the key to unlocking trust, adoption, and interoperability.
As regulatory frameworks take hold around the world, not every stablecoin will qualify. The ones that do will be those built on sound legal foundations, with transparent operations and safeguards that protect users in all market conditions, and credible asset backing.
In a world where your digital “dollar” could be backed by Treasuries, commercial paper, or little more than a promise, one question matters more than ever:
Who’s protecting your stablecoin?
About OpenEden
OpenEden operates a leading real-world asset (RWA) tokenization platform, renowned for its unmatched focus on regulatory standards and advanced financial technology. Founded in 2022, OpenEden bridges traditional and decentralized finance by providing, through its regulated entities in Bermuda and the BVI, secure, transparent, and compliant on-chain access to tokenized RWA. OpenEden is tokenizing global finance with a core focus on compliance and innovation. To learn more, visit www.openeden.com.
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