Stablecoins look fungible. Their legal rights are not.

A dollar is a dollar until you ask who owes it to you. That question is becoming increasingly important as stablecoins move beyond crypto markets and into mainstream financial infrastructure.

Stablecoins are usually compared through the most visible parts of their design: the quality of their reserves, the frequency of attestations, the regulatory status of the issuer and whether the token can be redeemed at par. Those questions matter, but they are largely questions about the issuer and its balance sheet.

For many holders, the issuer is not the party they have a direct claim against. Wharton's recent Stablecoin Toolkit puts the scale of this plainly:

"Roughly ninety per cent of dollar stablecoins reach users through exchanges, wallet providers and other intermediaries rather than by direct issuer-to-retail distribution. Where coins are recorded in an omnibus account in an intermediary's name, it is the intermediary that holds the claim against the issuer and its reserves, while the user holds only a contractual claim against the intermediary, whose failure is governed by an entirely different body of law. Par redemption is, in that case, a wholesale guarantee described as a retail one."

A wholesale guarantee described as a retail one. You may control a token without having a direct claim on the reserves behind it, and if the intermediary fails, the fact that the stablecoin remains fully reserved may not answer the most important question: what exactly do you own, and against whom can you enforce it?

Economic convergence is not legal convergence

The report examines the emerging global framework and finds regulators increasingly agreeing on the economic characteristics of a credible fiat-backed stablecoin, while major differences in legal treatment remain unresolved.

Across the United States, Europe, the United Kingdom, Singapore, Hong Kong, Japan and the UAE, the direction is clear enough. Regulators are moving toward full reserves, high-quality liquid assets, par redemption, reserve segregation, regular reporting and supervision by a recognised authority.

That is meaningful progress, and it should make individual stablecoins safer. It should also create a clearer path for banks, payment companies and other financial institutions to issue digital dollars of their own.

But two tokens may both trade at one dollar, be fully reserved and settle on the same blockchain while giving their holders materially different rights. In the report's words, some jurisdictions "treat stablecoins as e-money, others as payment instruments, and others as a new sui generis category," producing a landscape "marked by divergence, not only in regulatory scope and intensity, but also in the underlying legal characterization of stablecoins."

These classifications are not academic details, because they determine what happens when something goes wrong.

Who has the right to redeem the token? Does that right belong to the beneficial owner, or only to the intermediary recorded with the issuer? Are the reserves protected if the issuer becomes insolvent, and can the token be used as collateral? Which jurisdiction's law applies when the issuer, holder, custodian and blockchain are all in different places?

Control of a private key does not answer those questions. Technical control and legal ownership are related, but they are not the same thing.

Some jurisdictions are closing the gap

Progress is real where it exists. The 2022 amendments introducing Article 12 of the US Uniform Commercial Code have now been adopted in thirty-three jurisdictions, New York being the most recent, in force from June this year. The United Kingdom's Property (Digital Assets etc) Act 2025 came into force on 31 January 2026, confirming that a thing is not prevented from being personal property merely because it is neither a thing in possession nor a thing in action.

Europe has gone further on issuers. Under MiCA, an issuer designated as significant after meeting at least three of seven criteria faces enhanced supervision and additional obligations, including an interoperability requirement. The criteria include measures such as more than ten million holders or reserve assets exceeding five billion euros.

The thresholds themselves are not the most important part. What matters is that stablecoins are no longer treated as interchangeable software objects. Their legal structure, distribution model, scale and systemic importance increasingly determine how they are regulated and what rights their holders receive.

Where the report ends and my argument begins

Everything above is documented. What follows is my own reading of where it leads, and I want to mark that line clearly.

Regulation can make each stablecoin safer while making the wider market more fragmented. Those two things are not in tension; they are the same process.

As more banks, fintechs, payment networks and financial institutions issue their own digital dollars, each may have its own reserve pool, redemption system, compliance framework, legal rights, approved jurisdictions, supported blockchains and sources of liquidity. To a user they may all look like dollars. Underneath they may be entirely different financial instruments.

That fragmentation will become one of the defining infrastructure problems of digital money. The market will need more than a growing list of individually regulated stablecoins. It will need a way for those dollars to move between one another without every token depending on its own isolated liquidity.

It is worth noting that MiCA's interoperability obligation suggests at least one supervisor has reached a similar conclusion.

The part I work on

This is part of the reason I work on Metal Dollar, so weigh what follows accordingly.

XMD was not designed as another issuer-specific stablecoin competing for shelf space. It is designed as a shared liquidity and interoperability layer that connects independently issued stablecoins through a common dollar. The underlying issuers keep their own brands, economics, reserve models, compliance requirements and customer relationships, while gaining a path between one another rather than operating in separate ecosystems.

What enters the XMD basket is proposed and decided through public, on-chain governance by Metal DAO. That does not remove governance risk or replace the need for legal clarity. It does mean proposals and decisions are visible rather than sitting inside an opaque internal process.

The broader point extends well beyond XMD. Issuance is only the first stage of building stablecoin infrastructure. Reserve quality and regulation can establish confidence in an individual token, but they do not automatically create interoperability, common liquidity, or equivalent legal rights across the market.

The question worth sitting with

Stablecoins may look fungible on a screen, and economically they may stay very close to a dollar. Legally and operationally they can represent very different things.

If you are at an institution weighing whether to issue: have you worked out not only what backs your dollar, but what your customer actually holds a claim against, and what your dollar can reach on the day it launches?

There is still an enormous amount of infrastructure left to build.