Digital money and the law: the unfinished logic of e-money and the future of stablecoins

Over the past two decades, regulators have sought to make digital money safe by layering prudential safeguards onto electronic money and, more recently, stablecoins. Yet this regulatory evolution has left unresolved a foundational legal question: who owns the money involved in a digital money issuance—specifically, the funds paid in by users and the assets backing the issued digital value? This article argues that the failure to clarify ownership has embedded a structural contradiction in digital- money law. Instruments designed to function as custodial, cash-like value are legally constructed as issuer liabilities, turning what is meant to be riskless money into credit by design. Tracing this logic from the EU's e-money directives through their global diffusion, the article shows how a hybrid custody–credit framework became regulatory orthodoxy across jurisdictions and was subsequently inherited by stablecoin regulation, including the EU's Markets in Crypto-Assets Regulation (MiCA). By conflating custody and credit, current regimes generate avoidable fragility and obscure the monetary hierarchy. The article concludes that stablecoins force policymakers to confront a choice long postponed by e-money law: either treat digital money as custody, with user ownership and structural bankruptcy remoteness, or as credit, with issuers recognised and regulated as monetary institutions.