Are Libra, Tether, MakerDAO and Paxos Issuing E-Money? Analysis of 9 Stablecoin Types Under the EU and UK E-Money Frameworks

59 Pages Posted: 12 Jan 2021

Date Written: August 15, 2020


In the FinTech world, 2020 could be called the year of stablecoins, which are crypto assets with a stable value. Stablecoins were analyzed by various intergovernmental organizations, regulators and scholars. Brightest minds around the world are still trying to understand what the legal nature of various types of stablecoins is and how to regulate stablecoins without hindering innovation. In the UK and EU, regulators are considering whether stablecoins such as LibraCoin are electronic money (e-money) and should be regulated accordingly.

In their analysis regulators and scholars concluded that some stablecoins could indeed be considered e-money. The author of this Working Paper found that most legal analyses were done in abstract and were not dedicated to specific stablecoins and the context in which they exist. This Working Paper address this gap by analyzing concrete stablecoins such as LibraCoin, USDT, PAXG, DAI and the context in which they exist.

One of the aims of the Working Paper is to create a general framework that can be used to analyse any existing stablecoin project under the UK and EU e-money legislation. This Working Paper defines nine types of stablecoin while explaining and applying the e-money test to these types of stablecoins.

Unsurprisingly, this Working Paper reveals that most stablecoins analyzed are not e-money. Some stablecoins such as USDT most likely can be considered as e-money in the EU and UK. However, functions and use cases for USDT are quite different from the use cases of e-money as we know it. USDT and other stablecoins are extensively used in the world of Decentralized Finance (DeFi), and regulators should take into consideration the context surrounding stablecoins when deciding whether to apply the e-money framework to them.

Keywords: Libra, LibraCoin, Tether, USDT, DAI, Stablecoin, Cryptocurrency, Crypto Asset, Electronic Money, E-Money, Electronic Money Directive, JPM, Tokens, EMD2, Legal Nature of Stablecoins, DeFi, FinTech, Blockchain, Decentralized Finance, CeFi

JEL Classification: G23, K22, K23,K20

Suggested Citation

Sokolov, Mykyta, Are Libra, Tether, MakerDAO and Paxos Issuing E-Money? Analysis of 9 Stablecoin Types Under the EU and UK E-Money Frameworks (August 15, 2020). Available at SSRN: or

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