First of all, let’s agree that the term “stablecoin” has been applied extremely loosely and liberally, in a truly decentralized fashion 😉 and I have personally seen it referring to single-currency or multi-currency pegged digital assets, to tokenized gold and diamonds products, to hybrid digital products with embedded algorithmic price “stabilization” logic, and to everything in between.

Let’s set aside all the tokenized assets and focus only on single-currency-denominated coins. Why? Because the definition of e-money boils down to:

• It is a digitally represented balance expressed in and denominated in fiat currency (just one, not multi-currencies);
• This digital value is normally issued in exchange for contribution or deposit of the actual fiat-value transfer (or equivalents), which essentially means that before e-money is issued, fiat funds must be contributed to the e-money issuer;
• These fiat funds must be segregated in a special segregated account and never commingled with the operational funds of the company;
• E-money is issued primarily as payment instruments to be used for purchases of goods and services;
• It must be redeemable and withdrawable on demand at face value;
• It does not expire, change or lose value;
• It does not earn interest.

So whenever you have to determine whether or not certain “stable” coins are e-money, you have to look at the terms of the issuance and find out how the aforementioned questions are addressed, such as:

• Are coins issued in exchange for fiat contributions?
• Do they expire?
• Can you exchange them back to fiat at any time and at face value?
• If exchange to fiat is offered, is it limited only to those coin holders who purchased the coin directly from the issuer or also to everyone who bought it on the secondary market?
• Who is accepting those coins as a form of payment? Is there a secondary market? Are there limitations?
• Does the coin issuer implement full backup and segregation of the fiat funds?

Hopefully, this framework will help you analyze stablecoins nature and compare them to e-money. 🙏