USD-denominated stablecoins account for roughly 99% of all stablecoins in circulation. USDC and USDT are the dominant force, and every meaningful new entrant has issued almost exclusively in dollars. The logical extension to my previous post – “The long road to €1 on-chain” – is therefore the journey of $1.
The underlying architecture is familiar: a payment instruction, a clearing system, a settlement layer, a set of compliance checks, a minting engine. But the technical implementation sits on a different stack, and more importantly, on a very different regulatory bedrock. That difference is the real subject of this post.
Jan Bruegel the Younger
The goal here is to trace $1 from a US bank account to USDC on-chain, step by step, and to use that journey as a lens for understanding what the US and European frameworks actually have in common and where they diverge in ways that matter.
The journey
Step 1. ACH transfer instructed to Circle account
A business or developer initiates a push payment through their bank, which enters the ACH network. An ACH transfer is the US equivalent of a SEPA Credit Transfer.
ACH – the Automated Clearing House – is the US domestic retail payment network governed by Nacha, a not-for-profit association incorporated in 1974, originally part of the American Bankers Association before separating in 1985. It is an industry association owned by its member banks. In 2025, the ACH network handled 35.2B of transactions worth ~$93T.
At data model level, the Nacha Operating Rules are the equivalent of the EPC SCT Rulebook: the foundation for every ACH payment, defining the roles and responsibilities of financial institutions and establishing clear guidelines for each network participant. And, as in the European ecosystem, Nacha governs but does not operate, The Federal Reserve and The Clearing House do, as we will see in the next step. But unlike the EPC SCT Rulebook – which sits beneath a layer of EU payment law, the Settlement Finality Directive, and now MiCA – the Nacha Operating Rules are a private contractual framework.
Standard wise, ACH uses a proprietary Nacha format, not ISO 20022.
Going into the specific fields, an ACH credit entry carries five core data elements: company name, company identification, receiving company name, receiving account number, and amount. The addenda record, the functional equivalent of the SCT’s T009 Remittance Information field, is optional for most entry classes, just as T009 is optional under the SCT rulebook. Like its European counterpart, the address of the originator is not part of the core data elements, with the consequent AML issues.
But the most consequential difference from SCT is not in the data model, it is in what happens after settlement. An ACH credit entry has a return window of two days, this means that it can be returned for up to two business days. That single fact shapes everything that follows.
Step 2. The transfer clears
After the origination bank submits the ACH entry, it is routed to one of two ACH operators for clearing: FedACH, operated by the Federal Reserve, or EPN the Electronic Payments Network, operated by The Clearing House, a private-sector consortium owned by the largest US commercial banks.
This two-operator structure has no European equivalent. STEP2 is a single pan-European Clearinghouse, operated by EBA Clearing as a bank consortium. The US runs two competing operators by deliberate design – one public, one private. The duopoly is real as both companies process roughly 50% of the transactions each.
The clearing mechanics are identical to STEP2. Both operators collect batches of ACH entries submitted by originating banks throughout the day, net the positions of each participating institution calculating what each bank owes or is owed across all transactions in the batch and pass those net positions to the settlement layer. No money has moved yet, as clearing is the reconciliation step, not the value transfer step.
For a USDC on-ramp, the clearing window determines when Circle’s bank receives the net credit in the settlement system and therefore when the clock starts on the return window. Until settlement happens, the ACH entry is still in transit. Until the return window closes after settlement, the funds are not final. Clearing gets the payment closer to Circle but does not make it safe to mint.
The 2025 Nacha figure (35.2B / $93T) covers commercial ACH only and uses a slightly different methodology than summing FedACH + EPN, which is why the numbers don’t add up perfectly.
Step 3. Transfer settles with Central Bank money at Fedwire Funds
Once the ACH batch has cleared, the net positions calculated by FedACH or EPN are passed to the Federal Reserve’s RTGS system – Fedwire – for settlement. Settlement is the actual transfer of value that discharges the net obligations between banks: money moves from the originating bank’s reserve account at the Federal Reserve to the receiving bank’s reserve account.
The total value of transfers over Fedwire in 2025 was $1,148 trillion – for context, T2 settled around €450 trillion in 2024. Fedwire is roughly 3x T2 by value which reflects the dollar’s role as global reserve currency and the volume of USD correspondent banking flows settling through the US system.
One structural stack difference from Europe is worth noting. The Federal Reserve operates both the ACH clearing infrastructure (FedACH) and the RTGS settlement layer (Fedwire). In Europe these are separate entities: EBA Clearing operates STEP2, the ECB operates T2. EPN and CHIPS, the private-sector US operators, also ultimately settle their net positions across reserve accounts at the Fed, making it the ultimate settlement institution regardless of which operator processed the transaction.
Access to this settlement infrastructure is tightly controlled, every Fedwire participant must hold a master account, and eligibility is limited primarily to FDIC-insured depository institutions. Circle, currently a state-licensed money transmitter, does not qualify and it settles through BNY Mellon: when the ACH net position lands at the Federal Reserve, it credits BNY Mellon’s master account and BNY Mellon then credits Circle’s commercial account. Concretely, Circle never holds central bank money directly but this may be about to change.
In December 2025, Circle received conditional OCC approval to establish First National Digital Currency Bank, a federally chartered national trust bank that would directly oversee the USDC reserve. A national trust bank charter makes an institution eligible to apply for a Federal Reserve master account, which would give Circle direct access to Fedwire and FedNow, thus eliminating the BNY Mellon intermediation layer entirely. The legal path is not yet clear: the Federal Reserve has not formally resolved whether OCC-chartered national trust banks qualify as depository institutions under the Federal Reserve Act, and master account approval remains the Fed’s discretion regardless of OCC charter status. For now, the intermediation layer remains. But the direction of travel is clear and Circle is building toward the same direct central bank settlement access that EMI gained in Europe in October 2025.
The settlement mechanism also differs from the European model in an important way. Every ACH batch does ultimately settle across Federal Reserve master accounts, just like Fedwire transfers, but in an indirect way: ACH nets settle through the National Settlement Service, a separate Fed service for multilateral clearing arrangements, not through direct Fedwire Funds transfers. This has major implications for finality.
Finality
There is no single US equivalent of the Settlement Finality Directive. The US achieves settlement finality through a patchwork of statutes, regulations, and operating rules rather than through one consolidated legal instrument.
The NSS distinction matters beyond operations: it is the key to understanding why ACH finality is structurally weaker than T2 finality. When FedACH instructs NSS to post net settlement entries, those entries are final as master account bookkeeping. But NSS settles the operator’s net position, not the individual ACH entries underneath it. Those remain governed by Nacha’s return rules for the entire return window of two business days. The finality of the net does not confer finality on the individual ACH transfer.
In Europe, the Settlement Finality Directive resolves this cleanly: once a transfer order enters a designated system, it is protected from insolvency proceedings from the moment it enters, regardless of what happens underneath. The US has no statutory equivalent, there is no single instrument that does what the SFD does: protect individual payment instructions from reversal or insolvency clawback at the moment of entry into the system.
For Fedwire transfers, finality is established under Regulation J, a Federal Reserve regulation not a statute passed by Congress. A payment over Fedwire is final and irrevocable when the amount is credited to the receiving institution’s master account but it stops short of the SFD’s insolvency protection. The SFD explicitly shields transfer orders in designated systems from insolvency proceedings from the moment they enter the system,Regulation J does not contain equivalent statutory insolvency protection.
For ACH, the picture is even weaker. When FedACH passes net positions to the Fed for settlement, the underlying ACH entries retain their two-business-day return window. The Fed’s reserve account settlement does not override Nacha’s return rules, so there is nothing protecting individual ACH transactions from being returned or from insolvency proceedings.
This is a structural constraint to Circle’s minting model: until the return window closes – two business days after settlement – Circle cannot be certain the incoming ACH credit will not be reversed. The money is in the system, it has settled across reserve accounts but it is not yet legally final in the way that a T2-settled SEPA payment is legally final. Circle manages this by imposing a holding period before USDC is available for withdrawal.
Step 4. Circle receives funds and starts the compliance checks
Once the ACH net position has settled through the National Settlement Service across Federal Reserve master accounts, Circle’s commercial account is credited. This is the moment Circle’s systems register the inbound dollar.
Circle’s primary banking partners for USDC minting and redemption are BNY Mellon and Cross River Bank.
Circle assigns each customer a unique beneficiary account number – a personal account identifier within Circle’s banking infrastructure. A secondary Reference ID in the memo field provides an additional routing layer. Without the associated information – beneficiary account number or Reference ID – the transaction cannot be matched to the appropriate account and funds are returned to the sender.
This is architecturally similar to Monerium’s personal IBAN model but with one meaningful difference: Monerium’s IBAN carries all routing information in a single field – the IBAN itself is the routing key, no secondary reference required. Circle’s model uses two fields – account number and memo reference – creating two points of potential failure. If one or the other is incorrectly entered or truncated in transit, the payment cannot be matched. The reconciliation problem is reduced compared to a pure memo-reference model, but not eliminated.
KYC
Circle is a licensed money transmitter in nearly every US state and is registered with FinCEN as a Money Services Business. Circle’s AML and CTF procedures are guided by all applicable laws and regulations, designed to prevent the use of USDC services for money laundering or terrorist financing. Customers onboarding to Circle Mint -Circle’s institutional minting platform – go through standard KYC: identity verification, beneficial ownership checks, sanctions screening, and PEP checks. Only approved businesses can mint and redeem USDC directly with Circle. Retail users access USDC through exchanges and intermediaries that hold their own Circle Mint relationships.
Travel Rule
The second check is the Travel Rule. In the US, FinCEN’s threshold for money services businesses is $3,000, three times the EU’s €1,000. Above this threshold, Circle must collect and retain originator and beneficiary information: name, address, account number, and amount. Below it, FinCEN’s broader BSA obligations still apply.
The same structural gap identified in the European journey exists here: the ACH entry carries originator name and account number but not address. Address is not a mandatory ACH field, just as P005 is not mandatory in SCT unless either PSP is outside the EEA. This is why Circle’s compliance check at the minting stage is not instantaneous, it depends on matching the inbound payment against onboarding records before USDC can be safely issued.
To solve this problem, Circle collects the missing fields from onboarding records. The compliance data travels off-chain, assembled from KYC rather than from the payment message itself.
The format is different and the threshold is higher, but the structural incompatibility between payment scheme mandatory fields and compliance data requirements is identical on both sides of the Atlantic.
Step 5a. USDC tokens minted and delivered to the user’s wallet
After Circle has verified the inbound payment, confirmed KYC status, and cleared the Travel Rule check, it mints USDC to the customer’s registered wallet address. The mint is an on-chain transaction: Circle’s smart contract issues new USDC tokens equivalent to the dollar amount received, net of any fees, and delivers them to the wallet address registered during onboarding.
The mint event is recorded on the blockchain, publicly verifiable, and immutable. From the blockchain’s perspective, a new quantity of USDC has entered circulation, backed by the dollar now sitting in Circle’s reserve.
This is where the two finality regimes collide and also the $1 journey diverges significantly from the €1 journey.
On the fiat leg, the dollar achieved settlement across Federal Reserve master accounts through NSS. But, as established in Step 3, that settlement does not confer finality on the underlying ACH entry because the two-business-day return window remains open. Circle has minted an on-chain token that is operationally irreversible. The USDC exists on the blockchain. It cannot be recalled, reversed, or clawed back through any mechanism available in the ACH system. Yet the dollar that backs it is not yet legally final.
Monerium does not face this asymmetry. A SEPA payment settled in T2 achieves legal finality under the Settlement Finality Directive from the moment it enters the designated system. The broader finality problem applies equally to both journeys. Blockchain finality is probabilistic, it is final after a sufficient number of block confirmations, not final in the legal sense recognised by any court or insolvency framework. A USDC transaction confirmed on Ethereum has no legal finality status equivalent to a T2-settled SEPA payment or a Fedwire transfer under Regulation J. MiCA does not resolve this, the GENIUS Act does not resolve this: on-chain confirmation and legal finality remain two different things, and the bridge between them is the on-ramp itself.
Step 5b. USD Reserves held in custody
After minting, the underlying dollar moves into the USDC reserve. This is where the $1 journey diverges most sharply from the €1 journey, and where the regulatory bedrock underneath the two systems is most visibly different.
The majority of the USDC reserve is held in the Circle Reserve Fund (USDXX), an SEC-registered 2a-7 government money market fund. The fund holds cash, short-dated US Treasuries, and overnight US Treasury repurchase agreements with leading global banks. As of early 2026, approximately 80% or more of USDC reserves sit in this fund, managed by BlackRock and custodied at BNY Mellon. The remaining cash deposits sit at GSIB banks including BNY Mellon, Customers Bank, and Cross River Bank.
Deloitte & Touche LLP is Circle’s independent auditor, having audited Circle’s financials since fiscal year 2022. Circle Group management asserts that the fair value of assets held in USDC reserve is equal to or greater than USDC in circulation at the report dates. Monthly attestation reports are published on Circle’s transparency page, with daily portfolio reporting available through BlackRock.
This is transparent and well-structured, but the legal architecture underneath it is fundamentally different from Monerium’s. Monerium holds customer funds under EMD2 Article 7, a statutory safeguarding requirement that mandates 100% segregation of customer funds from operational accounts in a credit institution or low-risk liquid assets, for the benefit of customers. MiCA Title III adds reserve, redemption, and disclosure requirements on top.
Circle holds USDC reserves under SEC Rule 2a-7, the money market fund regulation that governs the Circle Reserve Fund. It is not a stablecoin reserve regulation: it does not mandate per-customer segregation and does not embed a statutory par redemption right in banking law. The GENIUS Act, which became US law in July 2025, begins to address this, it establishes federal reserve requirements for payment stablecoin issuers, but the regulatory framework remains newer and thinner than EMD2’s 25-year foundation.
The practical consequence: EURe holders have a statutory claim on segregated funds under EU banking law, a right created by legislation that survives issuer insolvency. USDC holders have a contractual claim on a money market fund governed by securities regulation, a right created by agreement, enforceable only through general insolvency proceedings.
Both are backed 1:1, both are redeemable at par and, in normal conditions, the difference is invisible. It only becomes visible in the precise moment when it matters most: when the issuer is in distress.
Conclusions
Same architecture, different legal foundations. The plumbing (ACH, RTGS settlement, compliance checks, minting engine, reserve) is structurally identical on both sides of the Atlantic: the clearing is batched and netted in both cases; settlement happens in central bank money in both cases. The compliance stack operates the same way: KYC at onboarding, Travel Rule at transaction level, off-chain data assembled because the payment rails don’t carry enough. The token is minted the same way, the reserve exists for the same reason.
What really differs is the regulatory bedrock underneath each layer: from settlement finality to reserve protection. Europe built a statutory framework for e-money 25 years ago and has extended it to stablecoins through MiCA. Every layer of the €1 journey sits beneath legislation that was written for it: the Settlement Finality Directive protects the fiat leg, EMD2 protects the reserve, MiCA governs the token. The US assembled its stack from existing parts that were designed for adjacent purposes: state money transmitter licences, money market fund regulation, federal reserve policy. The GENIUS Act, enacted in July 2025, begins to build the federal framework that the European side has had for a generation. It is a start but it is not yet the same solid regulatory foundation.
This matters most in the place you cannot see: the moment of issuer distress. In normal conditions the two journeys are indistinguishable: the dollar arrives, the token is minted, the reserve is held, redemption works. The difference only becomes legible when the issuer fails, and the question shifts from “is my money there” to “what law protects my claim to it.” That is when statutory bedrock and contractual bedrock stop looking the same.
The $1 road and the €1 road are the same length. One is paved. But everyone in crypto uses the other.
Resources
Step 1. ACH transfer
- Nacha Operating Rules — foundation for every ACH payment
- Nacha ACH Statistics — 2025 volume and value data
- Federal Reserve ACH (FedACH) — Fed’s ACH operator
- BIS CPMI Red Book — United States — comprehensive US payment system overview
Step 2. Clearing
Step 3. Settlement and Finality
- Fedwire Funds Service annual statistics
- National Settlement Service annual statistics
- Fedwire Funds PFMI Disclosure — Regulation J finality
- Federal Reserve Master Account Guidelines
- Circle OCC National Trust Charter approval
- Settlement Finality Directive 98/26/EC — for comparison
Step 4. Reconciliation, KYC, Travel Rule
- Circle — What is a beneficiary account number
- Circle — Depositing USD
- FinCEN Travel Rule guidance — Funds Travel Regulations Q&A
- 31 CFR 1010.410 — Travel Rule regulation text
Step 5a. Minting
- MiCA Regulation — EUR-Lex
- GENIUS Act — S.1582 signed into law July 18, 2025
- Regulation J — Fedwire finality
Step 5b. Reserves
