Your Stablecoin Is Regulated. But What Do You Actually Own?
Regulation converged. Property law didn't.
By mid-2026 the major jurisdictions had settled on broadly the same regulated instrument: a fiat-referenced token, redeemable at par by holders with a direct claim on the issuer, fully backed by segregated high-quality liquid assets, issued by a licensed and supervised entity. The United States under the GENIUS Act, the European Union under MiCA, the United Kingdom under its new cryptoasset regime, and Japan, Singapore, Hong Kong and the United Arab Emirates under frameworks of their own all describe recognisably the same thing.
What none of that settles is what a holder actually has. Whether a stablecoin is property. Whether control of a private key is the legal equivalent of possession. Whether a transfer is final and beyond unwinding. Whether the token can be posted as collateral or netted at close-out. Whether a holder who bought through an exchange, as most do, has any claim on the issuer at all.
The Wharton Blockchain and Digital Asset Project's second Stablecoin Toolkit report, published in August 2026, is the first serious attempt to map that gap. The project's first report established that the licensed perimeter and the actual market are different shapes, which we worked through in every stablecoin law draws a perimeter, none of them defines a stablecoin. The second asks what a holder of a token sitting comfortably inside that perimeter actually owns. We've focused here on its private and commercial law analysis rather than its comparative regulatory survey, because the regulatory picture is now well documented elsewhere while the legal one is not, and because the questions it raises are the ones that decide outcomes when something goes wrong.
Why this stopped being academic
The timing is what makes the gap urgent. Hong Kong granted its first two issuer licences in April 2026 and the first regulated Hong Kong dollar stablecoin, Anchorpoint's HKDAP, entered beta distribution on 12 August 2026. The UK's Property (Digital Assets etc.) Act 2025 came into force on 31 January 2026, and the FCA published final rules for stablecoin issuance on 30 June 2026 ahead of a regime that takes effect in October 2027. In the US, the OCC published proposed GENIUS implementing rules in March 2026 and the FDIC followed in April.
Regulated tokens are now being issued to institutions that will hold them on balance sheet, post them as collateral, and eventually face the question of what happens if the issuer fails. Against that, the report cites the FSB's October 2025 thematic review, which found significant gaps and inconsistencies in implementation, with only five jurisdictions having finalised comprehensive frameworks as of August 2025.
Control is the new possession, and only some places have said so
The unifying concept across every serious attempt to fit digital assets into commercial law is control, treated as the functional equivalent of possession for something that cannot be physically held. A person has control where they can obtain the benefits of the asset, prevent others from doing so, and unilaterally change who has control.
Three instruments have adopted that logic. The UNIDROIT Principles on Digital Assets and Private Law, adopted in 2023, make control the basis for security rights, third-party effectiveness and priority, along with protection for an innocent acquirer taking in good faith. The UK's Property (Digital Assets etc.) Act 2025 confirms statutorily that a thing is not prevented from being personal property merely because it is neither a thing in possession nor a thing in action, resolving a question the courts had been working through case by case. And in the US, the 2022 UCC amendments introduced Article 12 on controllable electronic records, under which a qualifying purchaser who obtains control for value, in good faith and without notice takes free of competing property claims. For a dollar-backed stablecoin structured as a claim on an issuer, that mechanism can convert the token into something close to the electronic equivalent of a negotiable instrument.
Switzerland reached a similar destination four years earlier and through a different route. The Federal DLT Act, fully in force by August 2021, created "ledger-based securities" as a new category in the Swiss Code of Obligations: rights registered in a distributed ledger that can only be transferred through it, so legal title moves automatically on-chain without any separate off-chain step. The Act also requires custodians to segregate digital assets from their own estate in insolvency, provided the assets are identifiable to a specific owner. The catch is that it's an opt-in structure: a stablecoin issuer has to deliberately constitute the token as a Swiss ledger-based security for any of this to apply, and neither of the two dominant tokens is structured that way. But as a model for what legal certainty around on-chain assets can look like once a jurisdiction commits to resolving it, Switzerland's approach predates and complements the frameworks that followed.
The catch with the others is adoption. Article 12 is state law. New York's enactment took effect on 3 June 2026, making it the thirty-third jurisdiction to adopt the 2022 amendments. In the remaining states, digital assets fall back to the residual general intangible classification under Article 9, which offers no take-free protection and limits perfection to filing. The same token, held by the same institution, carries different commercial-law consequences depending on which state's law applies.
A court was asked to classify USDC and declined
The clearest illustration of how unsettled this is involves the second-largest stablecoin in the market.
In 2024 a pharmaceutical company transferred $1 million of USDC to an address that did not exist, after a copying error turned a letter into a digit. It sued Circle, arguing that USDC was either a negotiable instrument or a certificated security under Delaware's UCC and that the remedies for lost commercial instruments should apply. In February 2025 the federal judge dismissed the claim on contract grounds without classifying the token at all. The appeal was argued before the First Circuit on 8 October 2025, and no decision appears to have issued as of writing.
Whatever the outcome, the fact pattern is instructive. A US court asked to state what a fully reserved, widely held, soon-to-be-federally-regulated stablecoin is under commercial law found a way not to answer.
Finality and netting are the gaps institutions will feel first
Two doctrines matter more than any other for institutional use, and both are unresolved.
Settlement finality is the point at which a transfer becomes irrevocable and protected from unwinding in insolvency. In the EU, the Settlement Finality Directive applies to formally designated payment and securities settlement systems, which does not include most DLT-based stablecoin rails. The DLT Pilot Regime has extended finality protections to tokenised securities settled on distributed ledgers, but payment stablecoins sit outside it. In the US, UCC Article 4A governs funds-transfer finality, and whether a stablecoin transfer counts as a funds transfer turns on whether the issuer is a bank and the instruction a payment order, questions the 2022 UCC amendments and the GENIUS Act both leave open.
Close-out netting depends on characterisation. If a stablecoin is treated as cash or a cash equivalent, it can serve as an eligible settlement currency under an ISDA master agreement. If it is a commodity or a general intangible, the netting mechanics may not apply cleanly, and enforceability in insolvency becomes uncertain, with obvious consequences for anyone using stablecoins as variation margin. ISDA's 2024 Tokenized Collateral Guidance Note addresses the documentation layer and is deliberately jurisdiction-agnostic, which means it leaves the threshold characterisation question to national law. So does UNIDROIT.
Five regimes, five answers on insolvency
Where the frameworks diverge most sharply is also where it matters most. The comparison below is the most operationally useful material in the report.
Japan offers the strongest protection through its trust-type model. Stablecoins issued as trust beneficiary interests give holders a proprietary interest in reserves that is insolvency-remote by operation of the Trust Act, with no monetary cap. Bank-issued tokens under the deposit-type model are protected instead by deposit insurance, capped at JPY 10 million per holder.
Hong Kong provides the most detailed statutory articulation of holder rights: a right to par-value redemption, a direct right to pro rata disposal of reserve assets in insolvency, and a residual claim against the issuer for any shortfall. The expectation that valid redemption requests be processed within one business day is supervisory rather than statutory.
Singapore has set the requirements through MAS regulatory notices since 2023, including par-value redemption within five business days and legally segregated reserves. The dedicated Stablecoin Issuance Service as a formal regulated activity under the Payment Services Act has not yet been legislated, however. MAS confirmed in November 2025 that stablecoin legislation would follow in 2026, meaning a holder's protections currently rest on regulatory notice rather than primary statute, which is a meaningful distinction in an actual insolvency.
The EU routes protection through e-money law. MiCA requires e-money token issuers to redeem at par at any time on request, and because those issuers must be authorised as credit institutions or e-money institutions, holders inherit the redemption and insolvency treatment that applies to e-money under EU law.
The US takes required reserves out of the bankruptcy estate, gives holders a first-priority claim on them, and grants super-priority to any shortfall after an initial distribution. The report notes two problems. The provisions are in tension, since it isn't clear what the priority operates on if the reserves are already outside the estate. And commentators, notably Adam Levitin, have argued that holders may in practice rank behind repo and margin counterparties, debtor-in-possession lenders, professional fee carve-outs and setoff claims, so a nominal first priority sits well down the queue.
One detail cuts across all of them. Dissenting from the SEC's April 2025 stablecoin statement, Commissioner Caroline Crenshaw observed that roughly 90% of USD stablecoins circulate through intermediaries rather than direct issuer-to-retail channels. Most holders therefore have no direct redemption right against the issuer and no direct claim on the reserves. The statutory protection is real, and it belongs to someone else. The GENIUS Act does not resolve whether holders who acquire through an intermediary enjoy a direct right of redemption.
The e-money question that splits the EU and the UK
Fiat-backed stablecoins meet every element of the classic e-money definition. They are denominated in fiat, issued on receipt of funds, represent a claim on the issuer, and are built for payments. Two jurisdictions with near-identical starting definitions went opposite ways.
The EU treats an e-money token as electronic money within the meaning of the E-Money Directive, layering MiCA on top of existing licensing rather than replacing it. That preserves continuity of consumer protection at the cost of overlap, which the EBA had to address in a June 2025 opinion confirming that a crypto-asset service provider transacting e-money tokens under a MiCA authorisation does not need separate authorisation as a payment institution.
The UK went the other way. The 2026 Cryptoassets Regulations amend the Electronic Money Regulations 2011 to exclude qualifying stablecoins, so they are not e-money under UK law, and a firm issuing both needs separate permissions for each. The FCA's proposed statutory trust would instead give holders a proprietary claim over backing assets without the e-money classification.
Same instrument, same economic function, two different bodies of consumer protection law. Which regime shapes the redress available to a holder is now a matter of where the issuer is authorised, which is exactly the sort of divergence that produces arbitrage. Tracking which classification each jurisdiction has adopted, and what it pulls in behind it, is a large part of why we maintain the free Stablecoin Regulation Tracker across 200+ markets.
Nobody has solved redress
Payment law normally caps a consumer's exposure to unauthorised or erroneous transactions. In the US, the Electronic Fund Transfer Act limits liability on a graduated scale depending on how quickly the consumer gives notice. In the EU, PSD2 generally puts the loss on the payment service provider absent negligence or failure to report.
Whether either applies to stablecoin transfers is unresolved, and neither the GENIUS Act nor MiCA settles it. MiCA addresses error resolution through disclosure obligations rather than an affirmative liability framework. Nor has any jurisdiction, including those with the strongest insolvency protections, established a dispute mechanism for the situation where an issuer freezes a balance in response to a sanctions order or law enforcement request. Major issuers can and do freeze balances, and there is no standardised process or remedy for a holder caught in one.
What this means for each group
Banks and custodians. Compliance status and legal characterisation are separate diligence questions. Whether a token can be posted as collateral, netted at close-out, or recovered in an issuer failure depends on the governing law of the holding entity, not on the issuer's licence. In the US that turns on state law and on whether Article 12 has been adopted where the analysis lands.
Treasurers and corporate holders. If the position is held through an exchange or wallet provider rather than directly with the issuer, the redemption right documented in the regulation may not be the holder's to exercise.
Issuers. The report suggests that jurisdictions adopting payment stablecoin regimes could require issuers to disclose the governing law and forum in their standard terms, and notes that many custodial issuers already embed such clauses. That makes disclosure a codification of current good practice rather than a new burden.
Regulators and legislators. The unresolved items are specific and addressable: finality treatment for stablecoin rails, netting eligibility, whether intermediated holders have direct redemption rights, and a redress framework for frozen balances. None of them requires reopening the licensing regime.
The takeaway: convergence is real, and it is shallow
It's tempting to read the last two years as a story of regulatory harmonisation. Reserve rules, segregation, licensing and redemption obligations really have landed in similar places across seven major jurisdictions, which is more convergence than most areas of financial regulation manage in a decade.
But regulation determines who may issue and on what terms. Private law determines what a holder has, and private law is national, slow, and not converging. A token can satisfy every reserve and disclosure requirement in its home regime and still leave its holder uncertain whether they own property or hold a contractual claim, whether their transfer can be unwound, and whether they stand ahead of or behind a repo counterparty in a failure. That's a different question from the one the perimeter debate answers, and it's the one that decides what happens when something breaks.
It's also why the operational concerns institutions raise about public blockchain settlement tend to be legal rather than technical, a pattern visible in the list of unresolved issues J.P. Morgan's Kinexys and MIT published earlier this year. The rails work. What's missing is the body of law that tells you what happened when you used them.
Source: "The Stablecoin Toolkit, Part II: Law, Regulation, and Monetary Policy," Wharton Blockchain and Digital Asset Project, August 2026. Case status for Celacare Technologies v Circle Internet Financial verified against First Circuit docket reporting and coverage of the 8 October 2025 oral argument; no decision was found as of writing. HKDAP launch details from Anchorpoint's 12 August 2026 announcement and contemporaneous reporting. Switzerland DLT Act details verified against the Swiss Federal Council's official summary and published commentary. All other figures and legal citations are drawn from the source report. Methodology note: this analysis focuses on the report's private and commercial law material, its comparative insolvency treatment, and the e-money interface, rather than its monetary policy chapter, and reorganises that material around the question of what a holder legally has.
This article is for informational purposes only and does not constitute financial, investment, or legal advice.