Stablecoin Regulation and Formal Verification: The Only Way for Compliance Development

With the rapid development of Web3 applications, more and more central banks and institutions are beginning to pay attention to digital asset products, with stablecoins becoming a key area of exploration. Stablecoins combine the efficient and transparent characteristics of blockchain with the stability of traditional finance, and are expected to reshape the global payment system and financial infrastructure. However, to promote the mainstream adoption of stablecoins, more efforts are still needed in areas such as user trust, regulatory Compliance, and compatibility with the existing Web3 ecosystem.

In a strict regulatory environment, Formal Verification is seen as a highly promising approach that can help build reliable stablecoin smart contracts while validating critical Compliance requirements. This article will focus on the following aspects:

• It is crucial for all issuers to have a comprehensive understanding of the regulatory requirements for stablecoins.
• When launching stablecoin projects in the United States, the "GENIUS Act" is an important basis for assessing Compliance risks;
• Formal Verification can help stablecoin projects more effectively meet the Compliance requirements of the GENIUS Act.

Overview of Stablecoin Regulatory Landscape

Since the first batch of cryptocurrency stablecoin projects emerged in 2014, stablecoins have been seen as a bridge connecting the traditional financial system and the Web3 world. The traditional financial system generally suffers from high latency, lack of transparency, and high costs. To address these shortcomings, stablecoins have introduced:

• Real-time Settlement
• Immutable record
• Smart contracts that can automatically verify rules or redirect foreign exchange paths
• Broader financial inclusion, allowing anyone to participate easily.

The electronic currency regulatory framework launched in 2009 was initially not designed for the Web3 scenario, but has now gradually extended to include Web3-compatible solutions, including stablecoins.

Currently, multiple regulatory bodies, including the Abu Dhabi Global Market and the Hong Kong Monetary Authority, have had their central banks testing related schemes. The U.S. Congress has passed the GENIUS Act, outlining a regulatory roadmap for the Compliance development of stablecoins.

GENIUS Act

The "GENIUS Act" launched in June 2025 establishes a mandatory Compliance framework for stablecoin payments in the United States. This act sets a unified federal-level "certification" for stablecoins, helping to reduce the issue of regulatory fragmentation and providing clear institutional guidelines for product design, risk management, and audit preparation. Adhering to the norms in the "GENIUS Act" is not only a basic requirement for Compliance but also a key safeguard for enhancing the security of user asset transactions.

From Legal Provisions to Formal Verification Lemmas

Formal Verification expresses each Compliance requirement as an invariant or activity on the chain. Taking the "GENIUS Act" as an example, the legal text can be formally expressed as the corresponding lemma. In addition, the technical invariants of certain stablecoins should be rigorously proven to ensure compliance with specific legal requirements.

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

Solana stablecoin program example: How to implement the invariance requirements of the "GENIUS Act"

We have built a stablecoin system case based on Solana and performed Formal Verification on its specifications. In the complete results, we successfully formally proved the core invariant: Total Supply ≤ Total Reserves.

Once all proof obligations have been demonstrated, this Solana stablecoin program example can be mathematically proven to strictly meet the Compliance requirements of Article 4(a)(1)(A) of the "one-to-one reserve backing" as stipulated in the GENIUS Act.

The Importance of Formal Verification

Formal Verification is crucial for the Compliance of stablecoins, as it protects the funds and confidence of every participant. Adhering to best practices in Formal Verification will bring additional advantages to stablecoin protocols:

1. Win regulatory trust
2. Reduce Risk
3. Improve Audit Efficiency
4. Achieve Market Differentiation

In addition, being able to state that "our protocol has undergone Formal Verification in accordance with the requirements of the GENIUS Act, and there are no unresolved proof obligations" transforms Compliance risks into competitive advantages.

Future Outlook

As global regulators' attention on stablecoins deepens, compliance and security have become the 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.

The Formal Verification framework can generate on-chain security proofs that can be machine-verified, directly corresponding to Compliance requirements. This is not a theoretical exploration, but a reliable guarantee aimed at practical production environments.

With the continuous improvement of the regulatory environment, Formal Verification will play an increasingly important role in the Compliance development of stablecoins. Through systematic and provably secure methods, stablecoin projects can better achieve compliance and operate with high reliability, contributing to the healthy development of the Web3 ecosystem.