Regulatory Cover

Assesses the scope and relevance of licenses held by the issuing entity, alongside bankruptcy remoteness for both the issuer and custodian structures.

The methodology distinguishes generic Virtual Asset Service Provider (VASP) registration from stablecoin-specific prudential regimes. The strongest tier requires a recognized stablecoin-specific framework (GENIUS Act, MiCA Asset-Referenced or E-Money Token regimes, MAS Stablecoin Issuer regulation) combined with bankruptcy-remote legal structuring. A regulatory arbitrage flag downgrades assets that nominally comply with a favorable jurisdiction's framework while maintaining material operational exposure elsewhere.

Tier	Reasoning	Evidence
Stablecoin-specific regime with bankruptcy remoteness	Reserve-specific prudential supervision directly regulates reserve composition, redemption obligation, segregation, and attestation. Combined with legal structures that place reserves outside the issuer's insolvency estate, this provides the strongest available protection for both day-to-day discipline and tail-stress recoverability.	MAS Stablecoin Issuer Regulation (2023), MiCA Asset-Referenced and E-Money Token regimes (2024), and the US GENIUS Act (2025) impose specific requirements on reserve composition, redemption-at-par, attestation cadence, and bankruptcy treatment. PYUSD operates under NYDFS Trust Company regulation; USDC under MiCA EMT registration.
General VASP or payment license only	Provides operational legitimacy and some supervisory discipline but does not typically regulate the core stablecoin mechanics — reserve composition, redemption obligation, or segregation standards. Bankruptcy remoteness is not automatic.	Generic licensing under FATF (Financial Action Task Force) VASP frameworks or state-level money-transmitter regimes places no specific requirements on reserve composition or redemption. Multiple historical issuers operated under such regimes while maintaining weak reserve controls (BUSD before NYDFS oversight, FDUSD pre-FDT crisis).
Undisclosed or unregulated	Absence of formal supervision is treated as the worst case because legal opacity itself constitutes structural risk: enforcement pathways, insolvency handling, and reserve claims are all uncertain.	Cred (2020), Voyager (2022), and Prime Trust (2023) all involved customer-asset commingling and contested ownership in the absence of reserve-specific oversight. Loss recovery in insolvency was materially weaker than for regulated equivalents.