A stablecoin development company builds the token contracts and the mint and redeem systems behind a stablecoin, but it cannot supply the reserves, bank accounts or license. This guide explains each part of a fiat-backed stablecoin, the US and EU rules, the steps to create one, and how to judge a developer or a stablecoin-as-a-service provider.
The main stablecoin designs
| Design | What backs the price | Examples | Main risk |
|---|---|---|---|
| Fiat-backed | Cash and short-term government debt held by the issuer or a custodian | USDC, USDT, PYUSD, USDG | Failure of the issuer, a bank or the reserve manager |
| Crypto-collateralized | More crypto than the stablecoins issued, locked in smart contracts | DAI and USDS, LUSD | Collateral price crashes and oracle failures |
| Synthetic or hedged | Crypto plus short futures positions that offset its price moves | Ethena's USDe | Negative funding rates, exchange failure and custody risk |
| Algorithmic (unbacked) | A second token that the system mints and burns to defend the price | TerraUSD, which collapsed in 2022 | A spiral of selling once confidence breaks |
This page covers stablecoins that an issuer backs with reserves. The algorithmic stablecoin guide covers designs where smart contracts hold the collateral or a second token defends the price.
How a fiat-backed stablecoin works
Minting and redemption
Approved customers, usually exchanges, fintech firms and other institutions, wire dollars to the issuer's reserve account. After the money arrives and the customer passes onboarding checks, the issuer mints the same number of tokens to the customer's approved address.
Redemption runs the other way. The customer sends tokens to the issuer, the issuer burns them, and the issuer wires dollars back. Retail users usually buy and sell on exchanges instead of redeeming with the issuer. Large holders can always redeem one token for one dollar, so they buy below $1 and sell above $1, and that trading keeps the market price near $1.
The token contract
Most issuers deploy an ERC-20 token on Ethereum and similar tokens on other chains. A stablecoin contract has controls that most other tokens leave out:
- Role-based minting and burning. Only approved minter accounts can create tokens, and each minter often has its own cap.
- Freezing and blocklists. The issuer can freeze an address to follow a court order or sanctions, and regulators expect this feature.
- Pause. The issuer can stop all transfers in an emergency.
- Upgrades through a proxy. The admin keys sit in a hardware-backed multisig wallet or in multi-party computation (MPC) custody.
- Signed approvals. EIP-2612 permits and EIP-3009 transfer authorizations let a user approve a payment by signature, so a third party can pay the gas fee.
The admin and minter roles are the main point of attack, because an attacker with a minter key can create tokens that no reserve backs. Minting should therefore need several approvals, and a monitor should compare new supply against reserve deposits in real time. An independent smart contract audit should cover the contracts on every chain.
Reserves and reports
Issuers hold reserves as bank deposits, short-term Treasury bills and repurchase agreements, often in a separate fund. An accounting firm checks the reserves against the tokens in circulation and publishes a report. Serious issuers publish on-chain supply next to each reserve report.
Stablecoin rules in the US and EU
United States. President Trump signed the GENIUS Act on July 18, 2025. It sets federal rules for payment stablecoins:
- Only permitted issuers may issue a payment stablecoin, meaning subsidiaries of insured banks, nonbank issuers approved at the federal level, and state-licensed issuers.
- A state-licensed issuer can stay under state oversight while it has no more than $10 billion of stablecoins outstanding.
- Reserves must cover the tokens at least one to one. Allowed reserves include cash, bank deposits, Treasury bills with 93 days or less to maturity, certain repurchase agreements and government money market funds.
- The issuer must publish the size and makeup of its reserves every month. A registered public accounting firm must examine each monthly report, and the CEO and CFO must certify it.
- An issuer may not pay interest or yield to holders for simply holding the stablecoin.
The Act takes effect 18 months after it was signed, or 120 days after regulators issue final rules, whichever comes first, and 18 months after signing is January 2027.
European Union. The stablecoin rules in MiCA have applied since June 30, 2024. A token tied to one official currency is an e-money token (EMT), and only a licensed credit institution or e-money institution may issue one. A token tied to a basket of currencies or other assets is an asset-referenced token (ART) and needs its own authorization. Several exchanges have delisted or limited stablecoins without MiCA authorization for EU users.
How to create a stablecoin: the steps
- Choose the legal structure and license route. The license decides who can legally issue the token, so this step comes first.
- Set up banking and custody for the reserves. Hire an accounting firm for the monthly reserve examinations.
- Build the operations platform. It handles customer onboarding, mint and redeem requests, treasury reconciliation and regulatory reports.
- Write and audit the token contracts for each chain. Separate the admin, minter and pause roles, and monitor them.
- Arrange distribution. Integrate with exchanges, wallets and payment processors. For other chains, use the issuer's own burn-and-mint transfer instead of third-party wrapped tokens.
What a stablecoin development company delivers
A stablecoin development company is a software firm. Its work usually covers these parts:
| Usually delivered by the developer | Must come from the issuer or its partners |
|---|---|
| Token contracts with roles, freeze, pause and upgrade controls | The issuing license, or a partnership with a licensed issuer |
| Mint and redeem portal for approved customers | Bank accounts and a custodian for the reserves |
| Treasury dashboard that matches supply to reserves | Monthly reserve examinations by an accounting firm |
| Key management setup with multisig or MPC | Compliance staff, AML program and sanctions screening policy |
| Integrations with wallets, exchanges and analytics tools | Distribution deals with exchanges and payment firms |
When you compare stablecoin development firms, ask for these items:
- Token contracts they have shipped, with links to the public audit reports.
- Their key management design for minter and admin roles.
- Whether the mint and redeem portal supports the reporting that the GENIUS Act or MiCA requires.
- Who will run and patch the system after launch, and at what cost.
Cost depends on the number of chains, the size of the operations platform, the number of audits and the integration work. A quote that leaves out reserves, banking and reserve examinations covers only part of the project.
Stablecoin as a service
Stablecoin as a service means a licensed issuer creates and runs a stablecoin under your brand. The provider holds the reserves, mints and redeems, and publishes the reports, while you handle the brand and the distribution. Paxos issues PayPal USD (PYUSD) and Global Dollar (USDG) this way. Bridge, which Stripe owns, also offers an issuance product that lets companies launch their own stablecoin.
Stablecoin as a service avoids the need for your own license. In return, the provider controls the reserves and the contracts, and its fees and terms set your margin.
When not to issue your own stablecoin
An app that needs stable value can usually accept an existing regulated stablecoin at lower cost and risk than issuing one. Banks, payment companies and platforms with a license and a distribution channel are the usual issuers. The cryptocurrency development guide covers token mechanics in general, and the blockchain in finance page covers uses in banking and payments.
Frequently asked questions
Can a startup launch a USD stablecoin?
Under the GENIUS Act and MiCA, a company needs authorization to issue a stablecoin. A startup without a license usually partners with a licensed issuer or uses a stablecoin-as-a-service provider.
What does a stablecoin development company not provide?
A development firm builds software. It does not supply reserves, bank accounts, the issuing license or the monthly reserve examinations.
Why do stablecoin contracts have freeze functions?
Issuers must follow sanctions rules and court orders, and holders must trust that the issuer will not misuse the power to freeze funds.
How do stablecoins move between blockchains?
The issuer can deploy the token natively on each chain or run its own burn-and-mint transfer service. Wrapped versions made by third parties add bridge risk.
Can stablecoin holders earn interest?
The GENIUS Act bars issuers of payment stablecoins from paying interest or yield to holders for holding the token. Yield products from third parties raise separate legal questions.