Why Stablecoins Don’t Work Without Boring Infrastructure

by Adam Bialy, founder and CEO of Fiat Republic.

It feels like everyone is excited about stablecoins. Visa is building on them, and Stripe just paid north of a billion dollars for Bridge. Governments are also in on the act, creating legislation left, right, and centre to bring them into the mainstream. There is real momentum.

However, after spending close to a decade in the trenches of this industry, one thing is clear: the biggest failures and the biggest successes are closely linked, and much of the future of stablecoins depends on how solid the foundations are.

Not to ruin the entire piece, but those “foundations” often aren’t. Pop the hood on almost any stablecoin, even the reputable ones, and ask one simple question – where is the money? Not the token, but the actual money. In a “stable” system, for every dollar that moves on-chain, there should be a real dollar sitting somewhere in a bank. A true one-to-one.

Despite increasing regulatory attention, including frameworks like MiCA in Europe, it is still a question the industry struggles to answer clearly.

That is a problem. Terra Luna collapsed because its reserves were never real. Signature and Silvergate fell because liquidity couldn’t move fast enough when confidence dropped. Different causes, same result: when the fiat layer underneath fails, everything built on top of it goes with it. Not over days, but in minutes.

If you are a treasurer and liquidity is not available at T0, and the market is already spooked, whether by geopolitical tension or a wider crash, there is no way to contain the panic. It snowballs. And everything built on top of that stablecoin, every integration, every partnership, every product, evaporates.

We have a problem with infrastructure

We need to move away from thinking of stablecoins as a technology story. In reality, they are an infrastructure story.

Think of it this way – if you are operating in crypto, you need a bank account. Full stop. Stablecoins are not yet being used at scale for everyday purchases. At some point, users want their money back in fiat. That means there has to be a connection to the traditional banking system somewhere in the stack.

That brings with it all the usual requirements. Fiat accounts, settlement, reconciliation, compliance. Thus, the real question is not how elegant the token is, but whether the infrastructure supporting it is regulated, licensed, and resilient under stress. Too often, it is not.

Many banks try to act as a Swiss Army knife, but no mainstream bank truly specialises in crypto transaction monitoring. Tier one banks typically avoid the risk altogether. Tier two and tier three banks step in, but they tend to offboard clients at the first sign of trouble.

It becomes binary. You are either on or you are off. There is very little in between.

A single AML flag or compliance concern can be enough for a crypto platform to lose its banking relationship, even after years of building it. And when that happens, the entire system is exposed.

What does this look like in reality? In our experience, RFI rates on poorly structured on-ramps can run as high as 15%. On our own network, that sits below 1%. That is the difference between working and not working.

What MiCA actually changed

MiCA has begun addressing some of these issues, and it does so in a way that is both specific and unambiguous.

It enforces fully reserved models. It requires direct backing in fiat. It mandates that issuance is handled by authorised entities. Funds must be safeguarded, segregated, and held in compliant institutions. In other words, it begins to answer the “show me the money” question.

But compliance is not a single hurdle. Operating across the EU and the UK is not one problem; it is two. Different jurisdictions, different licences, different requirements. This is where many platforms are still falling short. They rely on legacy arrangements, patchwork compliance, or legal opinions that say they are technically fine. But that is not the same as having robust, scalable infrastructure. A legal opinion is not the same as your customers’ money being safe.

And with the July 2026 deadline approaching, MiCA will start to draw a hard line. According to ESMA’s register, only around 100 CASPs hold full MiCA authorisation today. Over 1,200 VASPs operating across the EU still need to make that transition. Platforms that have not done the boring work – the licensing, the banking relationships, the operational setup – will find themselves shut out.

MiCA is a positive step. It raises the standard. But it also exposes just how many players are not ready.

The bottleneck is not the token

We are at an interesting moment that fills me with optimism. The US is now moving towards regulatory clarity that Europe has been building for years. As that happens, institutional capital is starting to flow in.

Macro conditions, despite short-term volatility, are as favourable as they have been. There is political support, clearer rules, and growing demand.

But the constraint will not be technical. It will be regulatory and infrastructural.

Platforms that do not have their fiat infrastructure in order will discover this the hard way. We are quite comfortable sitting at the bottom of the stack. The view from down here is that most of the industry is not ready for what is coming.

What stablecoins need to work at scale

If stablecoins are going to fulfil their promise, the industry needs to focus on a few fundamentals.

• First, transparent and verifiable reserves. The ability to clearly answer where the money is at any given time.
• Second, a robust banking infrastructure. Not generic accounts, but purpose-built systems designed for crypto-fiat flows, with proper licensing and compliance baked in.
• Third, instant and reliable redemption. Liquidity at T0 is not a nice-to-have; it is the foundation of trust.
• Fourth, regulatory alignment across jurisdictions. Not patchwork solutions, but scalable frameworks that work across borders.
• Finally, operational resilience. Systems that can handle stress, spikes in demand, and moments of panic without breaking.

The stablecoin market is maturing fast. Regulation is catching up, institutional money is moving in, and the use cases are becoming real. But maturity cuts both ways. The players whothat built on solid foundations will scale. The ones that didn’t will be exposed. The boring work was always the point.

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