The Compliance Path of Stablecoins: Formal Verification and New Regulatory Trends

With the rapid development of blockchain technology, more and more financial institutions are starting to pay attention to digital asset products, among which stablecoins have become an important direction. Stablecoins combine the efficiency and transparency of blockchain with the stability of traditional finance, and are expected to reshape global payment and financial infrastructure. However, for stablecoins to be widely adopted, efforts still need to be made in areas such as user trust, regulatory Compliance, and compatibility with existing blockchain ecosystems.

In a highly regulated environment, formal verification is seen as a promising approach to help build reliable stablecoin smart contracts while verifying key compliance requirements. This article will focus on the following areas:

• It is crucial for all issuers to fully understand the regulatory requirements of stablecoins.
• The GENIUS Act is an important basis for assessing compliance risks when launching stablecoin projects in the United States.
• Formal Verification can help stablecoin projects better meet the compliance requirements of the GENIUS Act.

Overview of Stablecoin Regulatory Landscape

Since the first batch of crypto stablecoins emerged in 2014, stablecoins have been regarded as a bridge connecting traditional finance and the blockchain world. The traditional financial system generally faces issues such as high delays, lack of transparency, and high costs. To address these shortcomings, stablecoins have introduced:

• Real-time Settlement
• Immutable transaction records
• Smart contracts that can automatically execute rules or redirect the flow of funds
• Broader financial inclusivity, allowing more people to participate conveniently.

Although the early regulatory framework for electronic currency was not initially designed for blockchain scenarios, it has gradually expanded to include blockchain-compatible solutions, including stablecoins.

Currently, regulatory agencies in multiple regions, including the Abu Dhabi International Financial Centre and the Hong Kong Monetary Authority, have begun testing related schemes. The U.S. Congress has passed the GENIUS Act, outlining a regulatory roadmap for the Compliance development of stablecoins.

Analysis of the GENIUS Act

The GENIUS Act, which will be launched in June 2025, establishes a mandatory Compliance framework for stablecoin payments in the United States. Some important provisions of this Act include:

• Require stablecoin issuers to maintain sufficient reserve assets
• Ensure that stablecoins can be redeemed at par value at any time.
• Establish risk management and governance standards
• Protect consumer rights and prevent money laundering risks

The Importance of the GENIUS Act

The bill establishes a unified federal "certification" for stablecoins, helping to reduce the problem of regulatory fragmentation and providing clear institutional guidance for product design, risk management, and audit preparation. Adhering to the standards in the GENIUS Act is not only a basic requirement for Compliance but also a key guarantee for enhancing the security of user asset transactions.

From Legal Provisions to Formal Verification

Formal Verification expresses each Compliance requirement as an invariant or activity on the chain. Taking the GENIUS Act as an example, the legal provisions within it can be formally expressed as multiple mathematical lemmas, such as:

• The total supply does not exceed the total reserve.
• The transaction delay does not exceed a specific time threshold.
• The reserve asset portfolio complies with the prescribed risk parameters.

These formal lemmas will become proof obligations in the selected verification framework. However, only some specifications are related to the formal verification process at the smart contract stage.

Solana stablecoin program case

We have built an example of a stablecoin system based on Solana and conducted Formal Verification on it. The program implements the core invariants required by the GENIUS Act, such as ensuring that the total supply does not exceed the total reserves.

Through Formal Verification, we can rigorously prove that the program meets the Compliance requirements of Article 4(a)(1)(A) regarding "one-to-one reserve support". This approach not only enhances code reliability but also provides strong support for regulatory compliance.

The Necessity of Formal Verification

Formal Verification is crucial for the Compliance of stablecoins, as it effectively protects the funds and confidence of participants. Adopting Formal Verification also brings the following advantages:

1. Enhance Regulatory Trust: Regulatory agencies can directly refer to machine-verified compliance certificates.
2. Reduce Risk: Automatically generate proofs during code iteration to avoid potential regression issues.
3. Improve audit efficiency: Financial and technical verification can be conducted simultaneously.
4. Achieving market differentiation: Enhancing partner trust and becoming an important support for brand reputation.

In addition, Formal Verification can accelerate several key processes, including regulatory approval, enterprise-level integration, and decentralized finance collaboration.

Conclusion

As global regulation's focus on stablecoins deepens, compliance and security have become core challenges faced by issuers. Whether to meet the requirements of the GENIUS Act or to plan for global expansion, stablecoin projects need to build a reliable security foundation from the ground up.

Formal Verification, as an advanced methodology, can provide strict mathematical proofs for stablecoin projects, ensuring they meet regulatory requirements and security standards. This not only enhances the credibility of the project but also allows it to stand out in a highly competitive market.

For project teams aspiring to develop secure, compliant stablecoins, Formal Verification will be a powerful tool that helps achieve a balance between innovation and compliance in an increasingly stringent regulatory environment.