Tag: stablecoins

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🪙 How a Stablecoin is Minted: A Step-by-Step Guide

Yogi Nelson

Welcome to the BlockchainAIForum where your technology questions are answered. Today we take explore the step-by-step process used to “mint” stablecoins. Minting is more than just pressing a button on a website—it involves a structured process combining real-world financial steps and blockchain technology. Stablecoins are blockchain-based tokens designed to maintain a steady value, typically pegged to a fiat currency like the US dollar. But what actually happens when someone “mints” a stablecoin? This article explains, in clear terms, how a fiat-backed stablecoin (like USDC or USDT) is minted, step by step.

📌 1️⃣ User Onboarding and Compliance

Step summary: The user proves their identity and gets authorized to use the stablecoin system.

  • What happens?
    A customer (say, Alice) wants to buy stablecoins. She registers with the issuing company (like Circle for USDC).
    She completes KYC (Know Your Customer) checks: uploading identification, proof of address, and sometimes even undergoing a video verification.
    Compliance teams review her information to prevent fraud, money laundering, or sanctions violations.
  • Tools used: Web forms and apps, compliance software, human compliance officers
  • Physical work: Reviewing documents, customer support for failed KYC

💰 2️⃣ Fiat Deposit

Step summary: The user sends actual money to the issuer.

  • What happens?
    Alice wires $10,000 from her bank account to the stablecoin issuer’s designated bank account. The issuer’s bank confirms receipt.
  • Tools used: SWIFT, ACH, SEPA, payment processors
  • Physical work: Bank staff may review or clear large transactions; finance teams reconcile wires

🔎 3️⃣ Treasury Verification and Approval

Step summary: The issuer confirms the deposit and authorizes minting.

  • What happens?
    The stablecoin company’s treasury team verifies the wire against Alice’s account. They check that the money actually settled (not just pending) and approve the minting amount.
  • Tools used: Banking portals, internal ledgers, compliance software
  • Physical work: Treasury analysts approve transactions; auditors may review records

🛠️ 4️⃣ Blockchain Transaction: Minting

Step summary: The issuer creates new tokens on-chain.

  • What happens?
    An authorized operator accesses the issuer’s blockchain wallet and uses a smart contract function called mint to create 10,000 new tokens. This transaction is submitted to the blockchain network.
  • Technical detail:
    The mint function increases the token supply by the specified amount. Validators confirm and record the transaction.
  • Tools used: Blockchain wallets (e.g., MetaMask, Gnosis Safe), command-line tools, smart contract interfaces
  • Physical/computer work: An employee signs the transaction using secure keys; blockchain nodes confirm it

🔗 5️⃣ Recording and Auditing

Step summary: The issuer updates internal records and ensures accountability.

  • What happens?
    The treasury updates its ledger: Alice’s $10,000 in the bank is matched by 10,000 newly minted tokens. Issuers often maintain 1:1 backing by keeping fiat reserves in segregated accounts.
  • Tools used: Accounting software, audit dashboards, blockchain explorers
  • Physical work: Accountants reconcile records; auditors verify the match between tokens and reserves

📲 6️⃣ Delivery to Customer

Step summary: Alice receives the stablecoins in her wallet.

  • What happens?
    The issuer sends the newly minted 10,000 tokens to Alice’s blockchain address. She sees them in her wallet and can now trade, lend, or hold them.
  • Tools used: Blockchain wallets, blockchain explorers, issuer’s platform for delivery
  • Physical/computer work: Staff initiates the transfer; Alice confirms receipt in her wallet

✅ Conclusion

Minting a stablecoin is not just a “crypto” step but a process that bridges real-world banking and blockchain technology. It involves:

  • Customer onboarding and compliance
  • Receiving and verifying fiat deposits
  • Authorized blockchain minting
  • Careful treasury management and audits
  • Delivering tokens to users

This process ensures that each stablecoin is genuinely backed by real assets, maintaining trust in the system.

📜 Final Note

Stablecoin issuers often publish attestation reports by independent auditors, proving that the total tokens in circulation match the fiat reserves held in bank accounts. This transparency is critical for user confidence in the stablecoin’s peg.

Time to go but first a proverb from Fiji, where they say: “children are like empty pots–they need careful fillling.

Until Next Time,

Yogi Nelson

Uncategorized

Crypto’s Legal Makeover: GENIUS and the Rise of Regulated Stablecoins

Yogi Nelson

What Is the GENIUS Act?

Blockchain & AI Forum — June 2025
By Yogi Nelson

Welcome to the Blockchain & AI Forum, where your questions are answered!
As a bonus, every post includes a proverb from around the world.

Today’s question comes from Latasha, who asks: What is the GENIUS Act?

🔍 Overview

The GENIUS Act has been approved by the U.S. Senate! It was introduced by Senator Bill Hagerty of Tennessee, your home state. As expected, GENIUS is an acronym:
“Guiding and Establishing National Innovation for U.S. Stablecoins, 2025.”

Let’s walk through what this bill says—section by section—and what it could mean for stablecoin issuers, regulators, and the future of U.S. digital finance.

📘 Key Definitions

GENIUS defines 23 terms, but none more important than this one:

Payment Stablecoin: A digital asset designed for payments or settlement. The issuer must maintain a fixed redemption value (e.g., 1:1 with the U.S. dollar) and is required to redeem, repurchase, or convert the token on demand. It is not a national currency or a security.

🏛️ Who Can Issue Stablecoins?

If GENIUS becomes law, (waiting for the House of Representatives and the President to act) only permitted stablecoin issuers may issue payment stablecoins. That means:

No freelancers. No startups cutting corners.
If you’re unauthorized—you’re out. Or worse, facing federal prison time. 🫢

🧾 Requirements for Issuing Stablecoins

Issuers must:

  1. Maintain 1:1 Liquid Reserves
    Reserves must include:
    • U.S. dollars
    • Bank demand deposits
    • Treasury bills, notes, or bonds (≤ 93 days)
    • Short-term repurchase agreements (≤ 7 days)
    • Money market funds
    • Federal Reserve deposits
  2. Ensure Transparency
    • Disclose redemption policies
    • Publish monthly reserve composition
    • Establish clear redemption procedures
  3. Certify Compliance Monthly
    • Signed certifications by both CEO and CFO

What Stablecoin Issuers Can Do

Issuers are restricted to these activities:

  • Issue and redeem stablecoins
  • Manage reserves
  • Provide custodial or safekeeping services
  • Engage in directly related activities

No off-brand ventures allowed.

🏢 Who Will Regulate?

Good news: no new federal agency will be created. Oversight will remain with existing regulators:

  • National Banks: Supervised by the OCC (Office of the Comptroller of the Currency)
  • FDIC-Insured Banks: Supervised by the FDIC
  • State-Chartered Banks: Must follow GENISIS via state regulators
  • Qualified Nonbanks: Regulated by the OCC

This streamlined approach avoids regulatory overlap and confusion.

📄 Application & Approval Process

Once an application is deemed complete, regulators have 120 days to approve or deny.

The Catch:
The 120-day clock doesn’t start until the regulator says the application is complete. A hostile regulator could delay indefinitely by asking for more documents.

If the application is rejected, the regulator must:

“Explain all findings related to material shortcomings and offer actionable recommendations for improvement.”

My Take:
This is unusual—and potentially risky. It effectively requires regulators to teach applicants how to qualify. That raises a key question:

If an applicant can’t complete a solid application, can they really run a stablecoin program? 🤔
And if the program later fails, will they blame the regulator for “bad tutoring”?

⚖️ Rulemaking Timeline

GENIUS includes a standard Rulemaking section.

Congress gives agencies 180 days from enactment to issue final regulations.

🏁 In other words: regulators, start your engines.

🌍 Proverb of the Day

Before I head out, here’s your bonus proverb:

🐻 “A hungry bear does not dance.”
– Turkish Proverb

Until next time,
– Yogi Nelson
Blockchain & AI Forum

Artificial Intelligence, Banking, Blockchains, cryptography, International Finance, Uncategorized

GENISUS Act: Implications for Stablecoin Issuers

Yogi Nelson

Namaste Yogis.   Welcome to the Blockchain & AI Forum, where your questions are answered!   As a bonus, a proverb is also included.  Today’s question comes from Latasha and she asks what is the GENISUS Act?

The GENISUS Act is a proposed federal law, introduced by Senator Hagerty of Tennessee–your home state.  To no surprise, GENISUS is an acronym: “Guiding and Establishing National Innovation for U.S. Stablecoins, 2025.” (Feds have the best acronyms!  Lol.)  Let’s review GENISUS Act section-by-section, beginning with definitions.

GENISUS defines 23 terms but none more important than Payment Stablecoin. According to GENISUS, a payment stablecoins is a digital asset that is designed to be used as a method of payment/settlement, and which the issuer is obligated to convert, redeem, or repurchased for a fixed amount of monetary value and represents it will maintain or creates the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value, and is not a national currency or a security issued by an investment company.” We now move on to Sections 3 – 7.

Permitted Stablecoin Issuers:  If GENISUS becomes law only a permitted stablecoin issuer can issue stablecoins.  No free lancers permitted!  Don’t even consider it unless you enjoy living in a 6 x 9-foot prison cell with a dude name Buba!  Lol.

Requirements for Issuing Payment Stablecoins. There are a litany of requirements to issue a payment stablecoin.  Below are a few highlights of what issuers must do:

  1. Maintain reserves backing the issuer’s payment stablecoins outstanding on an at least 1 to 1 basis comprising of: U.S. Dollars, demand deposits held in U.S. banks, treasury bills, notes, and bonds of 93 days or less, repurchase agreements of seven days or less, money market funds, Central Bank reserve deposits.  In other words, liquid reserves that are 1-to-1. 
  2. Issuers must also publicly disclose their redemption policy, establish procedures for redemption, and publish monthly composition of the issuer’s reserve. Disclosure!
  3. Monthly compliance certificates from the issuers, CEO and CFO.

Limitations of Stablecoin Activities.  Stablecoin issuers are limited to the following activities:

  • Issue payment stablecoins
  • Redeem payment stablecoins
  • Manage related reserves
  • Provide custodial or safekeeping services for payment stablecoins
  • Other directly related work.

Stablecoin Regulators.  GENISUS does not establish a new federal stablecoin regulator.  Relief! Consequently, if a nationally chartered bank, e.g. Bank of America, issues a stablecoin the same federal banking regulator, Office of the Comptroller of the Currency, (OCC) that supervised Bank of America for safety and soundness, will be tasked with regulating the bank’s stablecoin operations.  Simple.  The same applies if the bank has a FDIC banking charter.  State chartered banks can issue stablecoins, provided their corresponding state banking regulators follows the GENISUS Act. Standard practice in banking.  What if a federal qualified nonbank wants to issue a stablecoin you ask?  OCC will be the regulator of those nonbank stablecoin issuers.  Let’s move on.

Application and Approvals.  From the date the stablecoin regulator deems the application complete, the applicant must be approved or denied within 120 days.  The catch is from the date the application is deemed complete.  A malicious regulator can string an applicant along with a constant request for additional information. 

If the regulator deems the application unsafe it can reject the application but it must explain with specificity, including all findings made by the regulator with respect to all identified material shortcomings in the application, including actionable recommendations on how the applicant could address the identified material shortcomings.  I find this last section unusual and troublesome.  Essentially GENISUS requires the regulator to explain to the applicant how to do their “homework”.  This is problematic.  Afterall, if an applicant is incapable of preparing a coherent application, doesn’t it portent an institution incapable of running the program effectively?  I think so.  Moreover, if the stablecoin issuer fails, will it blame the banking regulator for its failure given the issuer could reasonably claim it followed the regulator’s instruction? 

Rulemaking.  Did you know that when Congress passed a law it writes into the law a section titled rulemaking?  The purpose of this section is to authorized and require the executive branch to write the regulations necessary to implement the letter and spirit of the law.  In the case of GENISUS, Congress directed the various stablecoin regulators to issue the regulations within 180 days from the day GENISUS becomes law.  Regulators, you better step on the gas!

Time for me to make a genesis appearance at my next engagement but before I go, I leave you with this proverb from Turkey: “a hungry bear does not dance”.

Until next time,

Yogi Nelson