Algorithmic Stablecoin Regulation

Regulator-Grade Guidance Document Last Updated: 4 June 2026

Executive Summary

The collapse of TerraUSD (UST) in May 2022 -- erasing approximately $40 billion in value over three days -- has become the defining event in stablecoin regulation globally. It triggered a wave of legislative and regulatory responses that have fundamentally reshaped how jurisdictions classify, restrict, and in some cases prohibit stablecoins that lack full fiat-asset reserves. This document analyses the global regulatory treatment of algorithmic, crypto-collateralised, and hybrid stablecoins across the 18 jurisdictions in the verified comparative fact matrix, providing policymakers with a grounded comparative analysis and a recommended proportionate framework for addressing these instruments.

The core finding is that a global consensus has emerged around three principles: (1) pure algorithmic stablecoins -- those relying solely on mint-burn mechanisms or seigniorage models without asset backing -- cannot meet the stabilisation requirements expected of instruments marketed as "stable"; (2) crypto-collateralised stablecoins occupy a regulatory grey zone where over-collateralisation partially mitigates but does not eliminate the risks that concern regulators; and (3) the regulatory response must be mechanism-specific rather than applying a uniform framework to all non-fiat-backed stablecoins.

A second, more granular finding emerges from the comparative matrix: only a small number of jurisdictions impose an explicit, named prohibition on algorithmic stablecoins. The United Arab Emirates (CBUAE Payment Token Services Regulation) and Brazil (BCB Resolutions 519/520/521 framework) are the two that prohibit algorithmic pegs outright. A larger group -- the EU, United Kingdom, Singapore, Japan, Hong Kong, Bahrain, the United States, Canada, and South Korea (under a pending bill) -- achieves de facto exclusion: algorithmic tokens cannot satisfy the full-reserve / par-redemption conditions of the privileged "regulated stablecoin" category, so they fall back to the general crypto-asset regime. A final group -- Bermuda, Australia, Switzerland, Turkey, Nigeria, South Africa, and India -- has no mechanism-specific provision at all, treating algorithmic and fiat-backed tokens alike under whatever general framework applies.

Every factual claim in this document mirrors the verified per-jurisdiction fact matrix (.claude/stablecoin-fact-matrix.json). Where the matrix records a fact as unconfirmed, the claim is marked NOT VERIFIED rather than asserted.

1. Taxonomy of Stablecoin Stabilisation Mechanisms

Understanding the regulatory landscape requires a precise taxonomy of how stablecoins attempt to maintain their peg. Regulators worldwide have adopted varying definitions, but four mechanism types are consistently distinguished.

1.1 Fiat-Collateralised (Reserve-Backed)

The baseline model against which all others are measured. Each token is backed 1:1 by fiat currency or high-quality liquid assets held in segregated reserve accounts. The holder has a direct legal claim against the issuer for redemption at par value.

Examples: USDC (Circle), USDT (Tether), USAT (Tether's GENIUS-compliant US issuance, launched January 2026), EURC (Circle), USDG (Paxos)

Regulatory treatment: This is the model that licensing frameworks and reserve requirements across all 18 studied jurisdictions are designed to accommodate. It is the only model that qualifies for the "payment stablecoin" or "regulated stablecoin" designation in every jurisdiction that has created such a category.

1.2 Pure Algorithmic (No Collateral -- Seigniorage/Mint-Burn)

The token maintains its peg solely through algorithmic supply management -- expanding supply when the price rises above the peg and contracting supply when it falls below. No external collateral of any kind backs the token. The mechanism depends on continuous market confidence and arbitrage incentives.

Mechanism: When the stablecoin trades below its peg, holders can burn it to mint a paired governance/seigniorage token at a profit, reducing stablecoin supply and theoretically restoring the peg. When it trades above peg, users mint new stablecoins by burning the governance token. This creates a reflexive relationship between the two tokens.

Example: TerraUSD (UST) / LUNA (collapsed May 2022)

Fatal flaw: The mechanism is inherently vulnerable to "death spirals." When confidence drops and large holders exit simultaneously, the burning of the stablecoin to mint the governance token causes the governance token to inflate hyperbolically, further eroding confidence and accelerating the collapse. The supply of LUNA increased by 1,911,427% during the UST collapse as the protocol attempted to restore the peg.

Regulatory treatment: Banned or effectively excluded in every jurisdiction with a dedicated stablecoin framework. The FSB states explicitly that "so-called algorithmic stablecoins do not meet Recommendation 9 as they do not use an effective stabilisation method."

1.3 Crypto-Collateralised (Over-Collateralised with Crypto Assets)

The token is backed by crypto-assets deposited as collateral in smart contracts, typically at a ratio significantly exceeding 100% to buffer against collateral price volatility. If the collateral value falls below a liquidation threshold, the position is automatically liquidated to preserve the peg.

Mechanism: Users deposit crypto-assets (e.g., ETH, WBTC) into a smart-contract vault and mint stablecoins against that collateral. A minimum collateralisation ratio (typically 150% or higher) is enforced. If the collateral value drops below the liquidation ratio, the vault is liquidated -- the collateral is sold on the open market to repay the stablecoin debt. The system is governance-managed through a decentralised autonomous organisation (DAO).

Examples: DAI (MakerDAO/Sky), LUSD (Liquity), RAI (Reflexer)

Regulatory treatment: Occupies a grey zone. Under

1.4 Fractional/Hybrid (Partial Collateral + Algorithmic Mechanism)

The token is partially backed by reserves and partially stabilised by algorithmic mechanisms. The collateral ratio is less than 100%, with the algorithm managing the gap.

Examples: FRAX (Frax Finance) -- originally launched with a fractional model where the collateralisation ratio adjusted dynamically based on market conditions. Frax has since moved toward 100% collateralisation, removing the algorithmic component.

Regulatory treatment: Generally treated as algorithmic/unbacked by regulators that distinguish by mechanism. The evolution of FRAX toward full collateralisation illustrates the market pressure created by regulatory frameworks that require 100% asset backing: hybrid models that cannot demonstrate full reserves face the same restrictions as pure algorithmic tokens.

1.5 How Regulators Define and Distinguish These Types

The table below summarises how key jurisdictions and international bodies define the boundary between "acceptable" and "unacceptable" stablecoin mechanisms:

2. The Terra/LUNA Case Study

The collapse of TerraUSD is not merely a historical event -- it is the primary evidentiary basis for the regulatory consensus against algorithmic stablecoins. Numerous regulatory actions described in this document trace, directly or indirectly, to this event.

2.1 Verified Timeline

2.2 Mechanism of Failure: The Death Spiral

The TerraUSD/LUNA system operated on a simple arbitrage incentive: when UST traded below $1, holders could burn 1 UST to mint $1 worth of LUNA, profiting from the difference and reducing UST supply. When UST traded above $1, users could burn LUNA to mint UST.

The death spiral occurred when:

1. Confidence shock: Large withdrawals from Anchor Protocol (which offered 19.5% APY on UST deposits) triggered mass selling.
2. Arbitrage overwhelmed: The volume of UST selling exceeded the market's willingness to absorb newly minted LUNA.
3. Reflexive collapse: Each new LUNA minted to absorb UST selling diluted LUNA's value, which further eroded confidence in UST's ability to maintain its peg, causing more UST selling.
4. Hyperinflation: LUNA supply expanded from approximately 350 million tokens to over 6.5 trillion in days.
5. Reserve depletion: LFG deployed its $3.5 billion Bitcoin reserve to defend the peg but was overwhelmed by the scale of redemptions.

2.3 Scale of Losses

The combined market capitalisation of UST and LUNA fell from approximately $40 billion to near zero over three days (7-13 May 2022). Sources vary between $40 billion and $45 billion depending on whether associated ecosystem tokens are included:

• $40 billion: Cited by CNBC, CNN, NBC News in connection with Do Kwon sentencing
• $45 billion: Cited by Harvard Law School Forum and FinanceFeeds, including broader ecosystem losses
• $50 billion: Cited by CoinDesk in Do Kwon sentencing coverage, including indirect contagion effects

For regulatory purposes, the figure of approximately $40 billion in direct UST/LUNA losses is the most conservative and well-attested figure.

2.4 Do Kwon: Prosecution Timeline

Sources: CNBC; CNN; NBC News; CoinDesk

2.5 What the Prosecution Revealed

A critical fact emerged during the criminal proceedings that underscores the fraud risk inherent in algorithmic stablecoin designs: when UST first slipped below its peg in May 2021 (one year before the final collapse), Kwon told investors a computer algorithm had restored the peg. In reality, he had arranged for a high-frequency trading firm to secretly buy millions of dollars of UST to artificially prop up its price. The "algorithm" that investors trusted was, in part, a human-directed market manipulation concealed behind the veneer of automated stabilisation. (In a related action, the SEC settled with Tai Mo Shan (Jump) for $123 million over UST manipulation in December 2024.)

This finding is directly relevant to regulatory design: even where an algorithmic mechanism exists, the opacity of smart-contract-based stabilisation creates opportunities for concealed manual intervention and fraud.

3. Global Regulatory Response Map

The post-Terra regulatory landscape divides the 18 studied jurisdictions into four categories based on their treatment of algorithmic stablecoins.

3.1 Category A: Explicit Ban or Prohibition

These jurisdictions have enacted specific legal provisions prohibiting algorithmic stablecoin issuance, intermediation, or promotion.

United Arab Emirates (CBUAE)

The Payment Token Services Regulation (PTSR), issued 7 June 2024 and effective 6 July 2024, contains an unambiguous prohibition: a person must not engage in any activity relating to an algorithmic stablecoin or privacy token. This extends to promotion: marketing algorithmic stablecoins within the

Legal citation: CBUAE PTSR (Prohibitions on Activities and Promotions); ADGM FRT framework; Federal Decree Law No. 6 of 2025

Brazil (BCB)

Brazil prohibits purely algorithmic stablecoins by central-bank rule rather than by a standalone criminal statute. Under the BCB framework operationalised by Resolutions 519, 520 and 521 (published November 2025, effective 2 February 2026), fiat-referenced stablecoin transactions are classified as foreign-exchange (FX) operations, and only asset-backed stablecoin models are permitted: Brazilian VASPs (authorised SPSAVs) may not offer or intermediate purely algorithmic pegs. The ban ensures that any stablecoin operating in the Brazilian market is backed by reserve assets and subject to FX prudential oversight.

Legal citation:

3.2 Category B: Effective Ban via Reserve / Redemption Requirements (De Facto Exclusion)

These jurisdictions have not enacted explicit prohibitions on algorithmic stablecoins but have designed their privileged stablecoin frameworks so that compliance is impossible for tokens without full asset backing and par redemption.

EU (MiCA)

• Recital 41 / category scoping: Pure supply-adjusting algorithmic tokens are excluded from the ART category. A token that references fiat or assets and is marketed as "stable" must fit the ART or EMT regime; one that references nothing is a general crypto-asset under the wider MiCA regime and cannot use "stable" in marketing.
• ART/EMT reserve requirements: Both ARTs and EMTs must maintain reserves of assets at least equal to the outstanding tokens at all times. These reserves must consist of high-quality liquid assets in segregated custody. An algorithmic stablecoin, by definition, does not hold such reserves -- it is therefore effectively inoperable because it cannot comply with either category's tangible-reserve requirement.
• Practical effect: Market infrastructure enforces this automatically. Major exchanges delisted non-MiCA-compliant stablecoins for EEA users from 31 March 2025.

United Kingdom (FCA/HMT)

The

Singapore (MAS)

Japan (JFSA)

Hong Kong (HKMA)

Bahrain (CBB)

United States (GENIUS Act)

The

Canada (Stablecoin Act)

South Korea (VAUPA / DABA pending)

3.3 Category C: No Mechanism-Specific Treatment

These jurisdictions regulate stablecoins (including algorithmic variants) under general crypto-asset or financial-market frameworks without algorithmic-specific provisions.

Switzerland (FINMA)

Australia (ASIC/APRA)

Bermuda (BMA)

Turkey (CMB)

Nigeria (SEC/CBN)

South Africa (FSCA/SARB)

India (RBI)

4. Comparative Regulatory Table

This table mirrors the verified per-jurisdiction t8 fields (banned / excluded-from-framework / notes) across all 18 jurisdictions.

5. Crypto-Collateralised Stablecoins: The DAI/MakerDAO Question

Crypto-collateralised stablecoins present a distinct regulatory challenge from pure algorithmic tokens. They do hold collateral -- often significantly more than the value of tokens in circulation -- but that collateral consists of volatile crypto-assets rather than fiat currency or government bonds. The leading example, DAI (now governed by Sky, formerly MakerDAO), warrants detailed analysis given its multi-billion-dollar market capitalisation and deep DeFi integration.

5.1 How DAI Works

DAI maintains its USD peg through an over-collateralisation mechanism:

1. Users deposit crypto-assets (ETH, WBTC, stETH, and increasingly real-world assets) into smart-contract "vaults" on Ethereum.
2. They mint DAI against this collateral, with a minimum collateralisation ratio (typically 150% for volatile assets, lower for stablecoins used as collateral).
3. If the collateral value falls below the liquidation threshold, the vault is automatically liquidated -- the collateral is sold to repay the DAI debt.
4. The system is governed by MKR token holders through a DAO structure.

Since 2023, MakerDAO has diversified into real-world assets (RWAs), including US Treasury bonds and institutional loans, making DAI's backing increasingly hybrid -- part crypto-collateral, part traditional financial assets.

5.2 Regulatory Treatment by Jurisdiction

EU (MiCA): Asset-Referenced Token

MiCA classifies a multi-asset-referencing token such as DAI as an Asset-Referenced Token (ART) because it references multiple assets to maintain value. However, ART compliance requires:

• An EU-incorporated legal entity as the issuer
• EBA-supervised governance with clear accountability
• Reserve assets held in segregated custody with licensed EU custodians
• A published white paper approved by the competent authority
• Par redemption rights for holders

A decentralised governance structure -- no legal entity, no identifiable board, no single jurisdiction -- makes compliance with these requirements practically impossible. The result is that non-MiCA-compliant stablecoins have been delisted from regulated EEA exchanges. This represents a significant regulatory gap: a resilient, multi-billion-dollar stablecoin (DAI maintained its peg through the 2022 crypto winter and multiple DeFi exploits) is excluded from the EU market not because of reserve inadequacy but because of governance structure.

US (GENIUS Act): Outside Payment Stablecoin Framework

DAI does not meet the GENIUS Act's definition of a "payment stablecoin" because it is not backed 1:1 by USD or qualifying low-risk assets. It also does not meet the "endogenously collateralised stablecoin" definition because it is not backed solely by tokens created by the same originator -- DAI is backed by external crypto-assets (ETH, WBTC) and RWAs. DAI exists in a regulatory gap: it is neither a payment stablecoin nor an endogenously collateralised one under the Act's definitions.

Singapore and Japan: General Crypto-Asset Regime

In both

5.3 The DeFi Governance Challenge

The fundamental regulatory challenge with crypto-collateralised stablecoins is not the collateral mechanism -- over-collateralisation provides genuine protection against single-point failures. The challenge is governance and accountability:

• No identifiable issuer: DAI is "issued" by smart contracts, not by a legal entity. When regulators require an issuer to maintain reserves, publish attestations, or guarantee redemption, there is no counterparty to whom these obligations can be assigned.
• DAO governance: MKR holders vote on risk parameters (collateral types, ratios, stability fees). These governance decisions have material financial consequences for DAI holders but are made without regulatory oversight of the kind applied to traditional financial institution boards.
• Smart contract risk: The stabilisation mechanism depends on the correct functioning of smart contracts. While these contracts are audited, they represent a systemic dependency -- a critical vulnerability in the Ethereum protocol or MakerDAO contracts could affect all DAI holders simultaneously.
• Cross-jurisdictional nature: MakerDAO has no domicile. Regulators cannot easily apply jurisdictional licensing requirements to a protocol that operates on a global, permissionless blockchain.

5.4 Regulatory Approaches to the DAO Problem

No jurisdiction has fully resolved the DAO governance challenge. Current approaches include:

• Ignore it: Most jurisdictions regulate the intermediaries (exchanges, custodians) that list and trade DAI rather than attempting to regulate MakerDAO itself.
• Require legal entity wrapper: The EU approach (MiCA) effectively requires any crypto-asset seeking ART/EMT designation to have a legal entity issuer, excluding decentralised protocols.
• Study it: The US GENIUS Act mandates a Treasury study of "endogenously collateralised" stablecoins but does not address decentralised governance directly.
• UAE approach: Federal Decree Law No. 6 of 2025 extends CBUAE jurisdiction to DeFi protocols and decentralised exchanges, but implementation details for how governance requirements apply to DAOs are pending.

6. International Body Positions

6.1 Financial Stability Board (FSB)

The FSB's position is the clearest of any international body. The July 2023 High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements (P170723-3) state:

"So-called algorithmic stablecoins do not meet Recommendation 9 as they do not use an effective stabilisation method."

This statement appears in a footnote of the final report. Recommendation 9 requires that GSC arrangements provide a robust legal claim to all users against the issuer and/or underlying reserve assets and guarantee timely redemption, and that a GSC should not rely on arbitrage activities to maintain a stable value and should not derive its value from algorithms.

The 2023 revision explicitly strengthened this position compared to the 2020 original, which did not specifically address algorithmic tokens. The revision was a direct response to the TerraUSD collapse.

Source: FSB P170723-3

6.2 IOSCO

IOSCO's November 2023 Policy Recommendations for Crypto and Digital Asset Markets (FR11/2023) apply all 18 recommendations to stablecoins, including algorithmic variants. The stablecoin disclosure expectations require disclosure of the mechanism used to support the peg, including whether the stablecoin is fully backed or supported by a reserve of assets or specific types of assets. For algorithmic stablecoins, this would require disclosure that no reserves exist -- a disclosure likely to have significant market impact.

IOSCO does not separately address algorithmic stablecoins but treats them as higher-risk crypto-assets requiring enhanced disclosure.

Source: IOSCO FR11/2023 (IOSCOPD747)

6.3 BIS/CPMI

The CPMI-IOSCO guidance on application of the PFMI to stablecoin arrangements (July 2022) addresses the money settlement safety of stablecoins used in payment systems. The guidance requires that a stablecoin used for money settlements should have little or no credit or liquidity risk and should provide holders with a direct legal claim on the issuer and/or claim on, title to or interest in the underlying reserve assets for timely convertibility at par. An algorithmic stablecoin with no reserves and no identifiable issuer cannot meet these requirements, effectively excluding it from systemically important payment system designation.

BIS research has separately analysed the instability of algorithmic stablecoin models, concluding that algorithmic designs are inherently susceptible to destabilising feedback loops.

Sources: BIS CPMI d206; BIS Bulletin No. 108

7. What Works and What Does Not

7.1 What Works

Mechanism-specific classification. Jurisdictions that draw clear definitional lines between stabilisation mechanisms -- Japan's EPI/crypto-asset distinction, the UK's "qualifying stablecoin" definition, or the GENIUS Act's "payment stablecoin" vs. "endogenously collateralised stablecoin" definitions -- provide the greatest regulatory clarity. Market participants can determine with certainty which framework applies to which token.

De facto exclusion through reserve / redemption requirements. The EU/MiCA approach of requiring 100% reserve backing for any token marketed as "stable" effectively excludes algorithmic tokens without requiring a politically contentious explicit ban. This approach is self-enforcing: market infrastructure (exchanges, payment processors) applies the rules automatically, as demonstrated by the March 2025 exchange delistings.

Proportionate treatment of crypto-collateralised tokens. Singapore's approach -- allowing crypto-collateralised stablecoins to exist under the general DPT regime while reserving the "MAS-regulated" SCS label for fully fiat-backed tokens -- recognises that over-collateralised designs like DAI pose different risks than pure algorithmic tokens.

Direct prohibition where confidence is paramount. The UAE's explicit, UAE-wide prohibition and Brazil's central-bank ban on purely algorithmic pegs send an unambiguous market signal, complemented by the deterrent effect of the Do Kwon prosecution (15 years for fraud, 11 December 2025).

7.2 What Does Not Work

No treatment at all. The jurisdictions with no mechanism-specific provision (Turkey, Switzerland, Bermuda, Australia, Nigeria, South Africa, India) leave holders without regulatory visibility into whether the stablecoins they hold are algorithmically "backed" or fully reserved. Where heavy retail stablecoin use coincides with this gap (e.g. Turkey, India), the framework regulates the trading venue but not the product. South Africa's own IFWG Diagnostic explicitly flags that stablecoin stability mechanisms are not overseen.

Binary ban/allow without graduated response. An outright ban on all algorithmic tokens may also capture innovative hybrid models that are moving toward full collateralisation (as FRAX has done). Regulators should monitor the evolution of fractional-algorithmic designs rather than assuming all algorithmic mechanisms are equivalent to the pure seigniorage model that caused the Terra collapse.

Ignoring the DeFi governance gap. Every jurisdiction studied either ignores decentralised governance or applies legal-entity requirements that exclude all DAO-governed tokens. Neither approach adequately addresses the multi-billion-dollar DAI market or the growing DeFi stablecoin ecosystem.

8. Recommended Framework: Proportionate Approach by Mechanism Type

Based on the comparative analysis, the following tiered framework is recommended for jurisdictions developing or refining their treatment of non-fiat-backed stablecoins.

8.1 Tier 1: Pure Algorithmic / Seigniorage (Prohibition or Maximum Restriction)

Mechanism: No external collateral; peg maintained solely through supply adjustment algorithms and arbitrage incentives.

Recommended treatment:

• Prohibition of issuance within the jurisdiction
• Prohibition of marketing as "stable," "pegged," or "value-referencing"
• If not prohibited, mandatory prominent risk warnings that the instrument has no asset backing and is subject to complete loss
• Exchanges listing such tokens must classify them as high-risk speculative assets, not stablecoins
• Mandatory disclosure that the stabilisation mechanism has no external collateral

Rationale: The Terra/LUNA collapse demonstrated conclusively that pure algorithmic models are subject to catastrophic death spirals. No pure algorithmic stablecoin has maintained its peg at scale over a sustained period. The FSB's position -- that these tokens do not use "an effective stabilisation method" -- provides the international standard-setting basis for this treatment.

8.2 Tier 2: Crypto-Collateralised / Over-Collateralised (Enhanced Requirements)

Mechanism: Token backed by crypto-assets at collateralisation ratios exceeding 100%, with automated liquidation mechanisms.

Recommended treatment:

• Permit under enhanced requirements, not banned
• Require a minimum collateralisation ratio of 150% (or higher, calibrated to collateral volatility)
• Require real-time public transparency of collateral composition and ratios (on-chain verification acceptable)
• Require independent smart contract audits at least annually
• Require governance disclosure -- who controls risk parameters, how changes are made, what recourse holders have
• Exclude from "regulated stablecoin" designation -- these tokens should not receive the same label as fiat-backed stablecoins
• Apply the general crypto-asset framework (AML/KYC, custody, trading) to intermediaries
• Where the protocol incorporates real-world assets in its collateral, require the RWA component to meet the jurisdiction's standard reserve requirements

Rationale: Over-collateralised designs like DAI have demonstrated genuine resilience. The mechanism has survived multiple severe market downturns including the May 2022 crypto crash. However, the volatile nature of crypto-collateral means these tokens cannot provide the same level of consumer certainty as fiat-backed stablecoins, and therefore should not be marketed equivalently.

8.3 Tier 3: Fractional/Hybrid (Transitional Treatment)

Mechanism: Partially collateralised with a combination of reserves and algorithmic supply management.

Recommended treatment:

• Apply the higher of Tier 1 or Tier 2 requirements, depending on collateralisation ratio
• If the collateralisation ratio is below 100%, treat as Tier 1 (algorithmic)
• If the collateralisation ratio is 100% or above (even if achieved through a combination of fiat, crypto, and algorithmic mechanisms), treat as Tier 2
• Require transparent and continuous disclosure of the actual collateralisation ratio
• Prohibit marketing as "fully backed" or "stable" unless collateralisation is demonstrably at or above 100% at all times

Rationale: The evolution of FRAX from fractional-algorithmic to fully collateralised demonstrates that market forces and regulatory pressure drive hybrid models toward full collateralisation. The framework should incentivise this evolution rather than prohibiting experimentation.

8.4 Decision Matrix for Regulators

Is the token marketed as "stable" or "pegged" to fiat?
  |
  +-- NO --> Regulate as general crypto-asset (general framework)
  |
  +-- YES --> Does the token maintain reserves of assets >= 100% of outstanding tokens?
               |
               +-- YES --> Are reserves denominated in fiat / government bonds / HQLA?
               |            |
               |            +-- YES --> Fiat-collateralised stablecoin framework
               |            |           (EMT/ART, payment stablecoin, EPI, SCS, FRS)
               |            |
               |            +-- NO --> Are reserves crypto-assets with >= 150% ratio?
               |                       |
               |                       +-- YES --> Tier 2 (enhanced requirements)
               |                       |
               |                       +-- NO --> Tier 1 (prohibit or maximum restriction)
               |
               +-- NO --> Does the token use algorithmic supply management?
                           |
                           +-- YES --> Tier 1 (prohibit or maximum restriction)
                           |
                           +-- NO --> Assess individually; likely general crypto-asset

9. Verification Notes

Source of Truth

This guidance document is a refresh synthesis that mirrors the verified per-jurisdiction fact matrix (.claude/stablecoin-fact-matrix.json, 18 jurisdictions) as of 4 June 2026. The algorithmic-stablecoin treatment for each jurisdiction reflects the matrix t8 fields (banned / excluded-from-framework / notes). No fact is asserted beyond the matrix or the pre-existing verified record; where the matrix records a fact as unconfirmed, it is carried here as NOT VERIFIED rather than asserted.

Corrections Applied in This Refresh

• South Korea: The Digital Asset Basic Act (DABA) is a pending bill (introduced 10 June 2025, re-proposed 2026; review pushed to H2 2026), not enacted. The enacted baseline is the Virtual Asset Users Protection Act (VAUPA, effective 19 July 2024). Prior text describing DABA as "passed June 2025" has been corrected.
• Brazil: Algorithmic stablecoins are already prohibited via the BCB Resolutions 519/520/521 framework (published November 2025, effective 2 February 2026), under which only asset-backed models are permitted. The earlier framing around a pending "Bill 4308/2024" criminal statute (8-year penalties) has been replaced with the matrix's central-bank-resolution basis.
• Hong Kong: Stablecoins Ordinance correctly cited as Cap. 656.
• Japan: PSA Amendment Act 2025 takes effect 1 June 2026 (single date; no separate operational deadline).
• United States: GENIUS Act implementing NPRMs (OCC, FDIC, FinCEN/OFAC) advanced Apr-May 2026; Tether launched USAT (GENIUS-compliant) in January 2026.
• Canada: Stablecoin Act enacted via Bill C-15 (Royal Assent 26 March 2026) but not yet in force; algorithmic/commodity-backed tokens are excluded from the Act.
• Terra/LUNA settlement figure standardised to the court-approved $4.47 billion (12 June 2024).

Coverage Added in This Refresh

The response map and comparative table now mirror t8 for all 18 matrix jurisdictions, adding Bermuda, Canada, India, Switzerland, the United Kingdom, Bahrain, Nigeria and South Africa alongside the previously covered EU, US, UAE, Brazil, Singapore, Japan, Hong Kong, Australia, South Korea and Turkey.

Items Marked NOT VERIFIED (per matrix)

• Switzerland: No specific algorithmic-stablecoin ban is stated in the matrix; FINMA applies substance-over-form under existing financial-market law.
• Bermuda: The matrix does not state an algorithmic ban; the SCPS Guidance is scoped to single-currency pegged (fiat-backed) stablecoins and does not address algorithmic treatment.
• Australia: Algorithmic-stablecoin treatment is not specifically addressed in the matrix; the proposed Tranche 1 framework targets single-currency fiat-backed tokens.

Note on Sources

External hyperlinks retained in this document support the Terra/LUNA case study and the international-body positions only; per-jurisdiction algorithmic-treatment claims derive solely from the verified fact matrix. No Wikipedia, Reddit, Quora, X/Twitter, or Medium sources are cited.