The Governance Problem Stablecoins Weren’t Built to Solve

By any reasonable definition, stablecoins work. But “working” is not the same as working compliantly.

Built to move value at internet speed, stablecoins promise and provide a cleaner, faster alternative to legacy rails, particularly for cross-border payments, on-chain settlement and crypto-native financial services.

For most of their short lives, stablecoins have been defined by what they are not. They are not volatile. They are not slow. They are not bound by the traditional banking hours, correspondent relationships or national borders that still shape global money movement.

Only now, as stablecoins push into the regulated financial system, they are colliding with a governance problem they were never built to solve.

In recent weeks, stablecoin firms such as Kontigo and BlindPay reportedly had accounts frozen by JPMorgan Chase after what one executive described as “a bunch of people [coming] in over the internet.” The phrasing is telling. It captures the core compliance anxiety around stablecoins: open access at global scale, combined with limited visibility into counterparties.

For banks and other FinTech partners, that combination can be combustible.

Read also: Managing Third-Party Risks Emerges as Key B2B Issue

The issue is not whether stablecoins can comply with know-your-customer (KYC), anti-money laundering (AML) and sanctions regimes in theory. It’s whether public-chain stablecoin systems, architected atop decentralized, consensus-based networks, can reliably coexist with centralized compliance expectations without transferring risk to their partners.

It’s a question that is gaining urgency as stablecoins gain traction. On Tuesday (Jan. 13), payments acceptance company Ingenico launched an integration with WalletConnect Pay designed to allow merchants to accept stablecoin payments directly at checkout. Also on Tuesday, Polygon Labs announced a pair of acquisitions designed to boost its stablecoin payments business.

As the stablecoin infrastructure stack matures, it’s beginning to resemble something familiar: Banking-as-a-Service (BaaS).

Like BaaS platforms, stablecoin issuers and middleware providers offer modular components such as custody, payments, liquidity and APIs (application programming interfaces) that allow third parties to embed financial functionality into their products. Like BaaS, stablecoins promise faster time to market and global reach without building a bank from scratch. And like BaaS, they are discovering that governance, not technology, can be the true bottleneck.

Public-chain stablecoins move through permissionless networks where wallets can be spun up instantly, identities are pseudonymous and transaction flows often cross jurisdictions in seconds. Compliance teams are left to reconstruct intent and risk after the fact, using blockchain analytics tools that remain probabilistic rather than definitive.

That creates a paradox. Stablecoins are often marketed as more transparent than traditional finance because blockchains are public ledgers. In practice, that transparency is unevenly useful. When compliance programs rely on incomplete data, noisy alerts or manual review of high-risk transactions, problems compound quickly. In that world, it can often be the sponsor bank or third-party partner that ultimately pays the price.

For banks and regulated FinTechs partnering with stablecoin platforms, this becomes a governance problem rather than a technical one. Who owns the risk when a transaction touches a sanctioned jurisdiction? Who is responsible when a wallet turns out to be controlled by an intermediary acting on behalf of unknown users? And who decides when the cost of monitoring outweighs the business upside?

See more: Tokenized Deposits Steal Stablecoin Buzz — and the Business Model

None of this means stablecoins are doomed to remain on the fringes. But it does suggest that their next phase of growth will be less about speed and more about structure.

“The real opportunity isn’t about chasing the buzzwords, but it’s more about being disciplined, identifying where stablecoins truly outperform a so-called legacy payment system,” Bryce Jurss, vice president, head of Americas, digital assets at Nuvei, told PYMNTS in September.

And as covered here previously, stablecoins may have become more prominent in 2025, but are still “not a panacea.” Consumer adoption is still uneven, especially in developed markets with well-functioning payment systems.

“User experience, custody and fraud prevention continue to lag behind familiar FinTech apps,” PYMNTS wrote.

Some solutions are already emerging, such as hybrid models that combine public-chain settlement with permissioned access layers. Some stablecoins, like Circle’s USDC, can exist natively on multiple public blockchains (e.g., Ethereum, Solana, Base, Polygon) while being designed so that issuance and redemption are centralized, meaning that governance decisions are off-chain and corporate, not protocol-level or community-driven.

At the same time, the U.S. is pushing forward with its own policy framework governing stablecoins, with the Treasury Department having sought comments on the domestic stablecoin law, the GENIUS Act, to inform research on methods to detect illicit activity involving digital assets.

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