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Defining Stablecoins: Five Essential Core Characteristics
1:58
The Ordinance provides a clear and carefully constructed definition of what constitutes a stablecoin, ensuring that only digital instruments with specific characteristics fall under the regulatory regime. At its core, a stablecoin must be a cryptographically secured digital representation of value. This means it is created and maintained using cryptographic methods that ensure integrity, authenticity, and resistance to tampering. Beyond its technical form, the stablecoin must also serve an economic function: it must operate as a unit of account or a store of economic value, and it must be intended for use by the public as a medium of exchange. This includes being accepted for payments, the discharge of debts, or for investment purposes. Additionally, it must be capable of being transferred, stored, or traded electronically, distinguishing it from physical forms of value. A defining feature is the technological basis. Stablecoins must operate on distributed ledger technology or similar decentralized information repositories. This ensures that records of transactions are shared, verified through consensus mechanisms, and synchronized across network nodes. This technological framework is central to their classification and is part of what differentiates them from conventional financial instruments or traditional electronic payment systems. Another essential criterion is the stabilizing reference. A stablecoin must purport to maintain a stable value by referencing a single asset or a pool of assets. This reference mechanism is what gives stablecoins their name and underpins user confidence. By clearly defining these characteristics, the Ordinance establishes a strong foundation for determining which digital instruments should fall within regulatory oversight, supporting market clarity and regulatory certainty.
Introduction to the Stablecoins Ordinance
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