The financial architecture of stablecoins: A primer

This SAFE White Paper presents a structured economic framework for assessing asset-backed stablecoins in their capacity as privately issued, fiscally anchored monetary instruments. Specifically, we evaluate the implications of stablecoins for financial intermediation, sovereign debt markets, and monetary transmission while devoting particular attention to differences between the United States and European Union. To this end, we characterize the basic economics of stablecoins by comparing their balance-sheet structure to narrow banks, money market funds, commercial banks, and central banks, highlighting that issuers engage in minimal maturity transformation and hold predominantly high-quality liquid assets against par-redeemable digital liabilities. Furthermore, we examine the regulatory design of the US GENIUS Act and the EU's MiCAR framework, showing how differences in reserve composition and supervisory architecture shape incentives for regulatory arbitrage and influence whether stablecoin growth reallocates existing sovereign debt holdings or generates net additional demand. For the euro area, the central question is whether digital liquidity remains anchored in domestic sovereign assets or shifts toward foreign-currency stablecoins, with implications for monetary sovereignty and financial stability. We conclude that Europe requires an active response: advancing a digital euro, strengthening global supervisory coordination, and reinforcing cross-border AML enforcement in public blockchain environments to safeguard monetary sovereignty and financial stability.