In this article
A stablecoin payment is the transfer, from one wallet to another on a public blockchain, of a token that an issuer promises to redeem at one unit of a currency, most often one US dollar. The payer gets the token by handing bank money to the issuer or to a seller, sends it onchain in a transaction that settles within minutes, and the payee either keeps the token or turns it back into bank money by redeeming or selling it.
Two layers are at work in every such payment, and most confusion comes from mixing them. The first is the issuer and its reserves: a company that takes in bank money, creates tokens against it and owes the holder that money back. The second is the token moving between wallets: a ledger entry on a network that no bank operates, changed by a transaction the payer signs. The transfer layer is fast and cheap. The entry and exit between bank money and the token are where most of the cost and most of the waiting sit.
What follows traces one business payment from bank account to bank account with its fees and delays, then covers what holds the value at one unit, what the issuer can do to a token, and how issuers are regulated in the European Union and in the United States. It is general information, not legal, tax or investment advice.
Read in Regulation (EU) 2023/1114, in Public Law 119-27 and in the Bank for International Settlements' Annual Economic Report 2025.
What is a stablecoin payment, exactly?
A stablecoin payment is a transfer of tokens, not a transfer of bank deposits: the payee ends up holding a claim on the token's issuer, recorded on a blockchain, in place of a balance at a bank. Nothing moves between the two parties' banks at the moment of the transfer.
When you receive a bank transfer, your bank owes you the money. When you receive a stablecoin, an address you control shows a larger token balance, and the party that owes you a dollar for each token is the issuer, a company you may never have dealt with. Whoever controls the address controls the tokens, and can send them on, hold them or present them for redemption under the issuer's conditions.
A stablecoin of this kind is backed by reserves in the currency it refers to. Other designs exist, such as tokens backed by other crypto-assets or stabilised by an algorithm, and they behave differently under stress; the reserve-backed kind is the only one described here. The two largest dollar tokens, known by the tickers USDT and USDC, are both of that type. What stablecoins are and why they became a payment instrument is the subject of another article here; the rest of this one is the mechanism.
What are the two layers behind every stablecoin payment?
Every stablecoin payment rests on an issuer layer, where bank money is exchanged for tokens and back, and a transfer layer, where the tokens move between wallets on a blockchain. The two layers differ in operator, opening hours, fees and risks.
On the issuer layer, a customer of the issuer sends bank money and the issuer creates the same number of tokens, an operation called minting. When a customer returns tokens, the issuer destroys them, called burning, and pays out bank money. Between those two moments the issuer holds the money received as reserves: bank deposits and short-dated government securities, in the regulated models. This layer runs on banking rails, so it keeps banking hours and banking cut-off times.
On the transfer layer, the token is a smart contract: a program on a blockchain that keeps the list of which address holds how many tokens. A payment is an instruction to that contract, signed with the payer's key, to lower one balance and raise another. The network's validators include the transaction in a block, and after a short period it is final. The transfer layer runs every hour of every day, charges a network fee that does not depend on the amount, and has no operator who can reverse a transfer because the payer changed their mind. How transactions, network fees and finality work is the subject of the article on how onchain payments work.
The same token often exists on several blockchains, each with its own contract. A token sent on one network arrives on that network only, so a payment instruction names three things: the token, the network and the receiving address.
What path does a business payment take from bank money to bank money?
A business payment in a stablecoin takes five steps when neither side holds the token: the payer funds an account with a provider, buys or mints the token, sends it onchain, the payee receives it, and the payee redeems or sells it and withdraws bank money. When both sides already hold tokens, only the third and fourth steps remain.
- The payer funds an accountThe payer sends bank money to the party it will get tokens from: the issuer itself, for a business that has been onboarded as a direct customer, or an exchange or payment provider. The payer has passed that party's identity and business verification beforehand. This step moves at the speed of the bank transfer used.
- The payer obtains the tokenThe issuer mints new tokens against the money received, or the provider sells tokens it already holds. The payer now has a token balance, either in an account at the provider or in a wallet whose keys the payer controls.
- The payer sends the tokenThe payer enters the payee's address, selects the network the payee asked for, and signs the transfer. The network fee is paid in the network's own asset. Within minutes the transfer is final and visible to anyone who looks up the address.
- The payee receives the tokenThe payee's balance rises by exactly the number of tokens sent: no intermediary deducts anything in transit. The payee matches the transaction to the invoice by amount, sending address and time, since a transfer carries no remittance text unless the parties arranged a reference.
- The payee holds, redeems or sellsThe payee keeps the tokens to pay its own suppliers, presents them to the issuer for redemption, or sells them through an exchange or payment provider, then withdraws bank money to its account. This step again moves at the speed of banking rails.
A business need not touch a wallet itself. A payment provider can sit at one or both ends, taking bank money from the payer and paying bank money to the payee, with the token used only in between. The provider then performs the same five steps and prices them into its fee. That arrangement removes key management from the business and adds a counterparty whose terms govern what happens if something goes wrong.
Step three deserves the most care. A token sent to a mistyped address, or on a network the payee does not use, is not returned by anyone as a matter of course.
Where does each fee and each delay sit on that path?
The fees and delays of a stablecoin payment sit mostly at the two ends, where bank money becomes a token and a token becomes bank money; the onchain transfer in the middle costs a small flat network fee and takes minutes. A payment that looks instant onchain can therefore still take a business day or more from bank account to bank account.
| Step | Fee, and who usually bears it | Delay |
|---|---|---|
| Funding the account | Bank transfer fee, payer | Minutes to business days, depending on the rail and the cut-off time |
| Obtaining the token | Conversion fee or spread, payer; sometimes none when minting directly with the issuer | Seconds to minutes once the money has arrived |
| Sending onchain | Network fee, flat, payer | Seconds to minutes, at any hour |
| Redeeming or selling | Conversion fee or spread, payee; plus any gap between the market price and one unit | Seconds to sell; redemption follows the issuer's processing times |
| Withdrawing bank money | Withdrawal or bank transfer fee, payee | Minutes to business days |
Two things follow. First, a currency conversion is a separate cost on top: a payee who wants euros for a dollar token pays a foreign exchange spread exactly as it would on a bank transfer in dollars. Second, weekends matter only at the ends. A token sent on a Saturday arrives on Saturday; whether the payee can turn it into a bank balance before Monday depends on its provider and its bank.
What does a stablecoin payment cost all-in?
On illustrative fees of $15 per bank transfer, 0.10% per conversion and $0.50 of network fee, a stablecoin payment costs $34.50 all-in on $2,000, $80.50 on $25,000 and $530.50 on $250,000, from the payer's bank account to the payee's. As a share of the amount, that is 1.73%, 0.32% and 0.21%.
The worked example assumes that neither side holds the token beforehand and that the token trades at exactly one dollar at both ends. The payer sends the invoiced number of tokens and bears the funding transfer, the purchase fee and the network fee. The payee bears the sale fee and the withdrawal fee. The fees are illustrative assumptions chosen to show the structure, not market quotes: read the actual ones on your own providers' schedules.
| Line | $2,000 payment | $25,000 payment | $250,000 payment |
|---|---|---|---|
| Payer's bank transfer to its provider | $15.00 | $15.00 | $15.00 |
| Payer's purchase fee, 0.10% | $2.00 | $25.00 | $250.00 |
| Network fee | $0.50 | $0.50 | $0.50 |
| Total leaving the payer's bank | $2,017.50 | $25,040.50 | $250,265.50 |
| Payee's sale fee, 0.10% | $2.00 | $25.00 | $250.00 |
| Payee's withdrawal to its bank | $15.00 | $15.00 | $15.00 |
| Net arriving at the payee's bank | $1,983.00 | $24,960.00 | $249,735.00 |
| All-in cost of the payment | $34.50 | $80.50 | $530.50 |
The fixed part is $30.50 on every payment. The proportional part is 0.20% of the amount: $4.00, $50.00 and $500.00. On these assumptions the two parts are equal at $15,250; below that amount the flat charges dominate, above it the conversion fees do.
Worked example, not market data. Assumes the token trades at exactly one dollar at both ends and excludes any currency conversion out of dollars.
Two variations change the picture more than any fee negotiation. If both parties already hold the token and intend to keep using it, the two ends disappear and the payment costs the network fee alone: $0.50 in this example, whatever the amount. And if the token trades slightly under one dollar when the payee sells, the shortfall is a cost too. A price of $0.997 at the moment of sale takes $6.00 from the $2,000 payment, $75.00 from the $25,000 payment and $750.00 from the $250,000 payment, which on the largest amount is more than the entire all-in cost computed above. Redeeming at par with the issuer avoids that gap; selling on a market accepts it.
What keeps a stablecoin at one unit of its currency, and when can it slip?
A reserve-backed stablecoin stays at one unit because the issuer creates and redeems tokens at exactly one unit against bank money, and because trading firms use that right to buy tokens when the market price falls below one and to sell them when it rises above. The price holds for as long as holders believe redemption will be honoured in full and on time.
The mechanism is arbitrage on the issuer layer. If a token changes hands at $0.998 on a market, a firm with direct access to the issuer can buy it there, redeem it for $1.00 and keep the difference. Its buying pushes the price back up. If the token trades at $1.002, the same firm mints at $1.00 and sells, pushing the price down. Holders who are not customers of the issuer rely on these firms to keep the market price next to par.
The price you see on a market is therefore a secondary price, and it can move away from one. The Bank for International Settlements wrote in its Annual Economic Report 2025 that stablecoins trade in secondary markets at an exchange rate that can deviate from par, and that they have seen substantial deviations from par. The mechanism points to three situations in which a price can slip: holders doubt the quality or the liquidity of the reserves; part of the reserves is held somewhere it cannot be reached for a time; or redemption is closed, as outside banking hours, while the market stays open. In each, the question is whether the issuer can turn its reserves into cash as fast as holders ask for it.
For a business, this risk is proportional to time. A payee that converts to bank money within the hour is exposed for an hour. A treasury that keeps a working balance in tokens for weeks is exposed for weeks and should treat the issuer as it would any counterparty holding its cash: read the reserve reports, set a limit, and know the redemption route.
What can the issuer do to a token after it has been sent?
The issuer of a reserve-backed stablecoin can usually freeze the tokens held at a given address and can refuse to redeem for a holder it has not verified or is not permitted to serve. It cannot reverse an ordinary transfer between two parties at the request of one of them.
The freeze function is written into the token's contract. When the issuer adds an address to its blocked list, the tokens at that address can no longer be sent, and in some contracts they can be destroyed and reissued elsewhere. Issuers use the function on the order of a court or an authority and to comply with sanctions. The Bank for International Settlements notes that issuers have occasionally frozen balances as a measure against money laundering and terrorist financing. In the United States, the federal stablecoin law makes the capability a condition of issuing at all: an issuer must be technologically able to comply with a lawful order to seize, freeze, burn or prevent the transfer of tokens.
For a payee, the practical meaning is narrow. The freeze attaches to an address, not to the history of each token, but a provider that screens incoming payments may hold or question funds whose origin it flags. Screening the counterparty before the payment is the control that fits.
How are stablecoin issuers regulated in the European Union and the United States?
Both the European Union and the United States now have a statute that says who may issue a single-currency stablecoin, what must back it and what the holder is owed: Regulation (EU) 2023/1114, known as MiCA, whose rules on e-money tokens have applied since 30 June 2024, and the GENIUS Act, Public Law 119-27, signed on 18 July 2025. The two texts agree on full backing and on a ban on paying interest to holders, and differ in how they frame redemption and reserves.
MiCA calls a token that refers to one official currency an e-money token and deems it to be electronic money. The United States statute calls the instrument a payment stablecoin and makes it unlawful for anyone other than a permitted issuer to issue one in the United States. The table gives the points as read in the two texts.
| Point | European Union, MiCA e-money tokens | United States, GENIUS Act |
|---|---|---|
| Who may issue | A credit institution or an electronic money institution, after notifying and publishing a white paper | A permitted payment stablecoin issuer |
| Holder's right | A claim on the issuer; redemption on request, at any time and at par value, without a redemption fee in ordinary circumstances | Redemption for a fixed amount; the issuer must publish a policy with clear procedures for timely redemption |
| Reserves | At least 30% of funds received in separate accounts at credit institutions; the rest in low-risk, highly liquid instruments in the same currency | Identifiable reserves of at least one to one: cash, insured deposits, Treasuries with 93 days or less remaining, certain repurchase agreements, government money market funds |
| Reporting | Conditions for redemption stated prominently in the white paper | Monthly reserve composition published, examined by a registered public accounting firm and certified by the chief executive and chief financial officer |
| Interest to holders | Prohibited, for issuers and for crypto-asset service providers | Prohibited: no interest or yield for holding or using the token |
Two further points matter in practice. Under the United States statute, issuers must ensure that the claims of token holders rank ahead of other creditors on the reserve assets, and a token issued by a foreign issuer may be offered in the United States only if, among other conditions, that issuer can and does comply with lawful orders. The statute also restricts service providers from offering stablecoins that are not issued by a permitted issuer, a restriction that begins three years after enactment.
Neither text makes a stablecoin a bank deposit. The holder's protection is the quality and segregation of the reserves and the supervision of the issuer, not a deposit guarantee scheme. Other jurisdictions have their own regimes or none, and rules of this kind are completed by technical standards and regulations: check the current text before relying on any point above.
How is a stablecoin payment recorded in the books?
A stablecoin payment is recorded at the amount of the invoice it settles, in the business's functional currency, with any difference between that amount and the bank money finally obtained booked as conversion cost or as a gain or loss. The evidence for the file is the transaction identifier, the two addresses, the network, the time and the statement of the provider that converted the tokens; how the token balance itself is classified while it is held depends on the accounting framework and is a question for the business's accountant.
Where does a stablecoin payment fit, and where does it not?
A stablecoin payment fits where speed, opening hours and finality are worth more than the cost and effort of the two conversions, and fits poorly where the payee needs bank money in a local currency at once, where a payment may need to be reversed, or where one side is not equipped to hold keys or onboard with a provider.
It tends to fit in these situations:
- Cross-border payments in dollars between businesses that both have a conversion route, particularly outside banking hours or between countries where correspondent banking is slow.
- Repeated payments between the same parties, where both keep a working balance in tokens and the ends are paid for rarely.
- Payments that must be final and visible at a precise moment.
- Larger amounts, where the fixed costs of the path are a small share: 0.21% on $250,000 in the worked example against 1.73% on $2,000.
It tends not to fit in these:
- Small one-off payments between parties who hold no tokens, where two bank transfers and two conversions cost more than a single domestic transfer would.
- Payments in a currency other than the dollar, since over 99% of stablecoins are dollar-denominated according to the Bank for International Settlements, and a conversion on each side removes much of the advantage.
- Situations where the payer expects a right to dispute and reverse.
- Payees whose bank, auditor or regulator has not yet accepted the flow.
One case sits between the two lists: a payment that has to be divided among several parties. A stablecoin transfer goes to one address, so a payee who owes shares to others must make further transfers afterwards. A payment router handles that case at the moment of payment. Shaka is one such router: each party's share is agreed, and can be signed by each recipient, before the client pays; the client pays once; every party is paid at the same moment in one transaction, up to 20 recipients; and Shaka routes the payment without ever holding the funds. It is not an escrow service, an exchange or a custodian: the two ends of the path described above remain each party's own business.
What should the two sides agree before the first payment?
Before a first stablecoin payment, the two sides should agree in writing on six points: the token, the network, the receiving address, the amount in tokens, who bears which conversion cost, and what counts as payment. The onchain record cannot resolve a dispute on any of them by itself.
The amount is the point most often left open. A contract that says "100,000 US dollars payable in a dollar stablecoin" does not say whether the payee is owed 100,000 tokens or enough tokens to net 100,000 dollars in its bank account after conversion; stating the amount in tokens, with each side bearing its own end of the path, settles it. A test transfer is worth agreeing for a new relationship. Finally, the contract says that the debt is discharged when the stated number of tokens is final at the stated address, which fixes the moment at which the price and freeze risks pass from the payer to the payee.
From that moment the payee holds a claim on an issuer, not money in a bank, and everything said above about reserves, redemption and the issuer's powers becomes the payee's concern until the tokens are converted or spent.
