Explainer: what merchants need to know as regulated stablecoins reach the POS

Carl Grimstad, CEO of Lydian, explains stablecoins in an ecommerce and retail setting, highlighting how regulation is contributing to their expansion. 

Stablecoins are becoming more relevant for payments and ecommerce. As regulatory frameworks develop across major markets, merchants are asking a practical question: what does accepting stablecoins mean for a business, especially at the point-of-sale (POS)? 

For years, concerns around crypto payments have centred on volatility, regulation, and the complexity of digital assets. Stablecoins address some volatility issues by pegging value to a fiat currency, while regulatory developments give businesses and payment providers clearer rules to apply. 

As broader concerns about the crypto market are answered, the next is how these payments function in practice. It would be unreasonable for merchants accepting stablecoins to manage every blockchain infrastructure or compliance layer themselves. The payment setup must provide the controls, settlement process, and oversight required for commercial transactions, without overburdening them. 

Regulation is changing the conversation on stablecoins

The digital asset regulatory environment is gaining clarity. In Europe, the Markets in Crypto-Assets Regulation (MiCA) provides a framework for crypto-asset activities, while other major regions are setting clearer expectations on stablecoins and digital asset payments.

For merchants, this should make it easier to assess what accepting stablecoins involves. Allowing a digital asset transaction through established payment infrastructure still differs significantly from taking a wallet-to-wallet transfer directly from a customer. In the latter, a business may have limited visibility into the source of funds, the wallet involved, or whether the transaction is subject to sanctions or financial crime risk. A clear mechanism for converting payment into the currency of the business may also be missing. 

Alternatively, a payment processed on established infrastructure can make those checks and balances native to the transaction. For merchants, this is far more relevant than the asset label. Simply put, established infrastructure payments make stablecoin transactions far more accessible for companies using them as a payment method over an investment solution.  

What happens at the checkout when you offer stablecoins?

From a merchant's perspective, stablecoin payments can look relatively familiar. The merchant enters the payment amount and generates a request, commonly through a QR code displayed on a POS device or screen, and the customer scans the code with their wallet and confirms the transaction.

Most of the complexity is in the background. Before approval, the wallet and transaction are screened for relevant risks, the exchange rate is set when the customer confirms payment, and the merchant receives confirmation once the transaction completes.

Settlement is one other important part of the process. A merchant selling goods in GPB, EUR, or USD may not want to hold a digital asset on its balance sheet. Payment infrastructure can convert the transaction and settle in local fiat currency, giving customers another way to pay without requiring the merchant to manage digital assets. 

Where should digital asset compliance be enforced?

Merchants need to understand exactly what their payment infrastructure is doing from a compliance standpoint. Merchant onboarding can include know your business (KYB) checks, business identity verification, beneficial ownership information, and sanctions screening. These controls establish who the system’s user is before transactions begin. Afterwards, at the transaction level, wallet screening can identify addresses flagged for sanctions, fraud, or other known risks before payment approval. Blockchain transactions provide a permanent activity record, but visibility only does not secure a transaction, so information needs assessment through appropriate screening and monitoring.

Ongoing monitoring also flags unusual behaviour after onboarding, such as sudden changes in transaction volumes, patterns indicating structuring, or links to higher-risk fund sources. All these can warrant further investigation, and it’s important to know how to divide responsibility. Merchants should know which checks their payment provider performs and which obligations remain with them. These can vary by jurisdiction and the parties involved. 

The Travel Rule: another stablecoin compliance layer

The Travel Rule is another consideration for businesses operating within the regulated digital asset ecosystem. Based on Financial Action Task Force (FATF) standards, the rule requires that relevant originator and beneficiary information accompany digital asset transfers between regulated entities. Its implementation varies by jurisdiction and transaction type.

For a merchant, this sounds considerably more complicated than the actual payment, so it’s important to clarify where the information exchange happens. When regulated entities handle the transfer, the required information exchange can happen within the payment infrastructure instead of being a manual task. Understanding the architecture clarifies to merchants what happens behind the payment and where their responsibilities are. 

Stablecoins reduce payment risk 

Stablecoins are designed to maintain a relatively stable value against a reference asset, so they’re inherently different to using a volatile cryptocurrency as a direct payment method. However, a remaining discussion point is how value is determined and when conversion happens. A payment can be priced in the merchant's local currency, while the customer pays using a stablecoin. The rate can lock when a customer confirms the transaction, allowing merchants to settle in a known fiat instead of being exposed to subsequent price movements. 

The blockchain transaction chargeback mechanism differs from card payments. Once confirmed, a transaction cannot be reversed through a card network, which reduces chargeback exposure. However, it creates a need for clear processes for legitimate refunds and incorrectly made payments. This certainty changes payment risk management, so merchants need to establish controls before approval to avoid challenges after a transaction completes. 

What should merchants look for?

As stablecoins become more established payment options, merchants should examine the supporting infrastructure with the same care they would apply to any other payment method.

There are some straightforward questions to ask:

• How are wallets and transactions screened? What checks happen before a payment is approved? What follows when a transaction is flagged?
• Who is responsible for compliance? What are the merchant’s and the infrastructure provider's responsibilities?
• How does settlement work? Does the merchant receive stablecoins or fiat? When do the funds become available? How is the exchange rate determined?
• How are refunds handled? Blockchain transactions can be final, so merchants need a clear process for returning funds when a customer is entitled to a refund.
• Does the solution work with existing checkout infrastructure? Retail merchants can use QR codes displayed on existing devices. Ecommerce businesses can use APIs, SDKs, plugins, or payment links. How does implementation fit into the existing payment environment? 
• Which assets and networks are supported? Stablecoins operate across different blockchain networks. Merchants should understand which assets they are accepting and why.

These questions offer a more useful way to assess stablecoin payments than asking whether crypto is ‘safe’. Payment process details determine where the risks are and how they are managed. 

Making stablecoins practical for commerce

Regulation is an important part of stablecoin payments development, setting the framework for how businesses and payment providers operate. Payment infrastructure still handles the practicalities, since wallet screening, merchant verification, transaction monitoring, settlement, conversion, refunds, and information exchange need to function together. If any of these create unnecessary friction, the payment experience can quickly turn difficult for merchants and customers alike.

Stablecoin payments can sit alongside cards, bank transfers, and other established payment methods. Merchants keep using existing payment options while giving customers another way to pay, and businesses can focus on concrete aspects, like whether the infrastructure supports a payment experience that fits their operating model. 

While many businesses may still be unfamiliar with the underlying technology, they shouldn’t feel that way regarding the checkout experience. A customer can pay from a digital wallet, while the merchant receives the currency it’s familiar with, and relevant checks and processes happen in the background. Stablecoin adoption will be tested at this stage. As regulation sets the rules, payment infrastructure should ensure compliance and POS functionality. 

This article is part of The Paypers’ Explainers section. To access other educational materials from this section, click here. If you have suggestions about other topics that could be included in this section, we invite you to write to us at editor@thepaypers.com. 

About the author

Carl Grimstad is CEO and co-founder of digital assets infrastructure provider Lydian, bringing a specialised payments processing background to the digital asset space. His mission is to embed infrastructure into the foundations of modern finance, enabling digital asset acceptance and settlement from any wallet across all supported networks. Under his leadership, Lydian has established itself as an independent infrastructure layer for major PSPs, enabling 300+ assets to confirm almost instantly at checkout for millions of merchants worldwide.