Fed Official Questions Stablecoins’ Cash-Out Promise

Key Takeaways

• Tether’s direct redemption starts at $100,000
• Circle Mint redemption serves institutions, not retail holders
• EEA retail holders can redeem USDC under MiCA
• Federal stablecoin rules take effect in January

Cleveland Fed President Beth Hammack laid out the problem in a November 5 speech at the SNB and Its Watchers conference in Zurich, speaking for herself rather than the Federal Reserve.

Hammack’s argument starts with who holds the tokens

Her reasoning runs as a chain. A major reason people outside the U.S. hold dollar stablecoins, she said, is that they cannot hold dollars directly. The GENIUS Act, signed in July 2025, guarantees that payment stablecoins can be redeemed for dollars and requires issuers to publish their redemption procedures and fees. A holder with no U.S. dollar bank account, however, may have nowhere to receive the proceeds. The guarantee then sits out of reach for the people who most depend on the tokens.

Americans face the reverse situation. Most can already hold insured dollar deposits or Treasury bills and earn a yield, so a payment stablecoin offers them less. Hammack suggested the market might therefore sort itself, with compliant tokens used mainly at home and “noncompliant stablecoins used overseas.” On that reading, whether the law adds to global dollar demand is an open question.

The offshore half of that picture has research behind it. A Cleveland Fed working paper she cited used stablecoin trading to track dollar demand after the April 2, 2025 tariff announcement. In Hammack’s summary, international investors turned to stablecoins as a dollar proxy, but only in countries with capital controls. For the onshore half, a separate Cleveland Fed survey of U.S. firms found little interest in using stablecoins.

Issuer redemption is priced for institutions

The gap shows up in the issuers’ own terms. Tether’s fee schedule sets a $100,000 minimum for direct redemption and charges the greater of $1,000 or 0.1%, after a $150 fee to verify a new account. Its redemption instructions also require payment into a verified bank account.

Because the $1,000 floor does not shrink with the amount, the smallest redemption Tether accepts carries the steepest rate:

Circle applies a similar gate to USDC outside Europe. Its USDC terms tie direct redemption to eligibility for, and registration of, a Circle Mint account. Its USDC product page presents Mint as an institutional service and points everyday users to exchanges and wallets.

Tether’s product line now mirrors the split Hammack described. In January, the company launched USAT, a separate token issued by Anchorage Digital Bank and built specifically for the U.S. federal framework. USDT remains its global product.

Europe writes in a retail right, with one condition

The European Economic Area is the exception. The EU’s Markets in Crypto-Assets Regulation (MiCA) gives holders of e-money tokens a right to redeem at par at any time. Circle’s MiCA redemption policy applies that right to USDC through Circle Internet Financial Europe, a French-licensed electronic money institution that issues the token inside the EEA.

Retail holders can register with Circle directly. Once they pass identity and transaction checks, the policy targets payment within five business days, unless the review turns up discrepancies. The catch is the receiving account. It must be an EEA bank account in the holder’s own name that can accept U.S. dollar payments, and Circle warns that the holder’s bank may add conversion or incoming-payment charges.

That requirement is Hammack’s point in miniature. What blocks the holder is the currency an account can take, not where the holder lives. Someone whose bank cannot accept dollar payments has the right on paper and no place to receive it.

The five-day target has a defined exception. During a stress event, which the policy describes as a period when Circle cannot rebalance USDC reserves between its French and U.S. entities, redemptions can be deferred. Licensed crypto platforms can also face a temporary cap on how much they redeem.

Robinhood Chain’s Launchpad Boom Faded in Three Months

Everyone else exits through an intermediary

Take a freelancer in an economy with capital controls who is paid 1,000 USDC. That balance sits far below any issuer minimum, and outside Europe there is no retail redemption right to invoke. The money reaches local currency through a third party or not at all.

One option is an exchange. The freelancer sells the tokens, then withdraws local currency, typically to a bank account that must match the verified customer’s name. The number that matters is what lands after the exchange’s spread, its withdrawal charge, network fees and the receiving bank’s costs. A token trading at $1 says nothing about that figure.

The other option skips the bank. MoneyGram’s Funds-Out terms cover supported wallet transactions that end with the recipient collecting local or another supported currency at a participating location. Whether that works depends on the destination, the token, the recipient’s identification and whether the nearest outlet takes part. Coindoo has looked at how MoneyGram’s stablecoin services work.

The obvious counter-argument is that retail holders were never meant to redeem directly. Eligible institutions mint and redeem, arbitrage holds the price near $1, and everyone else trades on the secondary market. Circle’s MiCA policy itself sends retail holders to exchanges first. It offers direct redemption to those refused there or who prefer to deal with Circle.

That settles whether a holder can get out, but not the question Hammack raised. A market exit pays whatever the intermediary quotes and relies on the intermediary’s own banking access. It does not require the token to be GENIUS-compliant, so the redemption guarantee gives an offshore user little reason to choose a compliant coin. That logic fits her expectation of compliant tokens staying largely onshore.

Before accepting pay in stablecoins, check:

1. Which service converts tokens in your country, and whether you qualify
2. Whether it gives a written quote for your exact amount and destination
3. When the money becomes spendable, not just sent

What to watch when the rules take effect

Hammack also allowed for the other side. Stablecoins may have advantages over traditional payments, such as running smart contracts or supporting payments made by AI agents, which could raise demand for the tokens and for the dollar assets behind them. She added that current U.S. rules do not directly address either use, which may slow adoption by U.S. institutions.

She noted that new federal stablecoin rules take effect in January, after the Treasury published proposed rules in August. The rollout gives her argument concrete markers. One is whether any GENIUS-compliant issuer opens direct retail redemption to holders outside the U.S. Another is how the final rules treat tokens issued abroad. A third is whether new supply grows faster in compliant or noncompliant tokens. Those figures, more than the statute’s wording, are where the reach of the redemption guarantee will become measurable.