Abstract
With the continuous acceleration of Web3[1] applications, more and more central banks and institutions are developing digital asset products, with stablecoins being one of the key focuses. Stablecoins balance the efficiency and transparency of blockchain with the stability of traditional finance and will reshape the global payment system and financial infrastructure. However, to promote the mainstream adoption of stablecoins [2], a solid foundation must be laid in terms of user trust, regulatory compliance, and compatibility with existing Web3 systems.
Under a strict compliance framework, formal verification is considered a highly promising methodology that can help build reliable stablecoin contracts while verifying key compliance requirements. This article will focus on the following directions:
A comprehensive understanding of the regulatory requirements for stablecoins is crucial for all stablecoin issuers;
When launching stablecoin projects in the United States, the (GENIUS Act) is an indispensable 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 launch of the first batch of crypto stablecoin projects in 2014 [3], stablecoins have been seen as a bridge connecting the traditional financial system and the Web3 world. The traditional financial system generally suffers from issues such as high latency, insufficient transparency, and high costs. To improve these shortcomings, stablecoins have introduced:
Real-time settlement
Immutable records
Smart contracts that can automatically verify rules or redirect foreign exchange paths
Broader financial inclusion, enabling anyone to participate easily
The E-Money regulatory framework launched in 2009 [4] was not originally designed for Web3 scenarios but has gradually extended to include Web3-compatible solutions, including stablecoins.
Currently, various regulatory agencies, including the Abu Dhabi Global Market (ADGM) and the Hong Kong Monetary Authority (HKMA), have their central banks testing related programs. The U.S. Congress has passed the (GENIUS Act), outlining a regulatory roadmap for the compliant development of stablecoins.
(GENIUS Act)
The (GENIUS Act) launched in June 2025 (Guiding and Establishing National Innovation for U.S. Stablecoins Act) establishes a mandatory compliance framework for stablecoin payments in the U.S.:
Part of the legal texts of the (GENIUS Act)
Some legal texts in Chinese reference are as follows:
Why is the (GENIUS Act) crucial?
This act establishes a unified federal 'certification' for stablecoins, helping to reduce regulatory fragmentation issues and providing clear institutional guidance for product design, risk management, and audit preparations. 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.
As CertiK's formal verification research team, we aim to introduce formal verification methodologies to help prove the key attributes of stablecoin smart contracts. By utilizing rigorous mathematical derivations and machine-checkable logical arguments, we ensure that the code meets compliance and security requirements under any boundary conditions.
From legal texts to formal verification lemmas
Formal verification expresses each compliance requirement as an on-chain invariant or liveness. Taking the (GENIUS Act) as an example, the aforementioned legal texts can be formally expressed as the following lemma:
In addition, the technical invariants of certain stablecoins should be strictly proven to ensure compliance with specific legal requirements.
Stablecoin technical invariants:
These formal lemmas will become proof obligations in the chosen verification framework (TLA⁺, Coq, K, Isabelle, or Why3).
However, among these specifications, only some are related to the formal verification process at the smart contract stage. In the following example, we built a case based on the Solana stablecoin system and formally verified its specifications.
Example of Solana stablecoin program: How to implement the (GENIUS Act) invariant requirements
Below is a simplified version of the Solana stablecoin program we built, demonstrating how all operations on the chain meet its core invariant:
Formal verification output example of the Solana stablecoin program
Below is a simplified version of the Solana stablecoin program example, used to demonstrate how to enforce core invariants on-chain:
In the complete results, we successfully formally proved the invariant: total supply ≤ total reserve, where
Total supply (total_supply) = ∑iAccount[i].amount
Total reserve (total_reserve) = ∑kBank[k].reserve
Core invariant:
Once all proof obligations are proven, the above Solana stablecoin program example can be mathematically proven to meet the compliance requirements of the (GENIUS Act) Section 4(a)(1)(A) regarding 'one-to-one reserve backing.'
Why formal verification is not 'just an added bonus' but a compliance necessity
Formal verification is not an optional feature. For the compliance of stablecoins, it is crucial for protecting the funds and confidence of every participant. Any vulnerabilities in the actual code implementation may lead to serious asset losses, regulatory penalties, or even long-term negative impacts on the brand.
Following best practices in formal verification will bring additional advantages to stablecoin protocols:
1. Earn regulatory trust: Regulatory agencies do not need to review a large number of legal documents or audit reports one by one; they can directly refer to machine-verified compliance proofs.
2. Reduce risk: When code is iterated, its handler contracts automatically generate proofs, avoiding potential risks from regression issues.
3. Enhance audit efficiency: As financial and technical proofs are checked simultaneously, security audits and CPA audits can proceed in parallel.
4. Achieve market differentiation: A 'provable compliance' statement can effectively enhance trust from banks, merchants, and DeFi platforms, becoming an important support for brand reputation and partnership expansion.
In addition, when introducing your stablecoin to the board, community, or regulatory authorities, being able to say, 'Our protocol has been formally verified according to the requirements of the (GENIUS Act), and there are no unresolved proof obligations,' transforms compliance risks into competitive advantages.
This not only enhances the project's credibility but also significantly accelerates multiple key processes, including:
Regulatory approval timeline (review passed, entering regulatory sandbox)
Enterprise-level integration (completeness proof required by banks and payment service providers)
DeFi partnerships (oracles and lending platforms are more inclined to trust mathematically verified protocols)
Next steps: Collaborate with CertiK to launch more safely and quickly.
As global regulators are increasingly focused on stablecoins, 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.
The formal verification framework independently developed by CertiK is specifically built for real blockchain application scenarios. Our approach breaks through the abstract models at the academic level, generating on-chain machine-verifiable security proofs that directly correspond to compliance requirements. This is not a theoretical exploration but a reliable guarantee aimed at practical production environments.
As the largest security company in Web3, CertiK is committed to the mission of 'full-line protection, achieving excellence.' Whether you are looking to meet the compliance requirements of the (GENIUS Act) or aiming to build a trustworthy stablecoin for the global market, CertiK can safeguard your project, enabling it to launch safely and efficiently.
We provide:
Custom formal verification framework tailored to your system architecture;
Compliance consulting services for the (GENIUS Act), ADGM, MAS, HKMA, and other regulations;
End-to-end security audits covering threat modeling, penetration testing, on-chain formal verification, and more;
Regulatory communication services to assist you in smoothly responding to OCC, the Federal Reserve, and state-level regulatory reviews.
How does CertiK differ from traditional formal verification products?
Implement hierarchical verification: ensure that the source code conforms to specifications, not just the abstract model of the protocol.
Proprietary attribute verification: Verifiable unique attributes of custom code that go beyond conventional general attributes.
Complex reasoning capabilities: Through automated reasoning, the ability to verify any complex code and attributes far exceeds the level achievable by developers, auditors, or even formal verification engineers through manual reasoning.
Production-oriented: Applicable to code in actual production environments that can be verified without large-scale restructuring, distinguishing it from formal verification solutions limited to prototypes or academic research.
As a leader in formal verification and blockchain security, CertiK has provided security assurance for over $530 billion in digital assets and has supported over 5,000 blockchain projects, laying a solid foundation for compliance and security for stablecoin projects.
We welcome further communication and can arrange a technical workshop on proof of concept audits to discuss how to help your stablecoin project achieve compliance and high reliability in a systematic and security-proven manner.
Reference:
[1] Web3: https://www.certik.com/resources/blog/Web3
[2] Stablecoins: https://www.certik.com/resources/blog/the-rise-of-stablecoins-in-unstable-times
[3] Since the launch of the first batch of crypto stablecoin projects in 2014: https://blog.bitmex.com/a-brief-history-of-stablecoins-part-1/?utm_source=chatgpt.com
[4] E-Money regulatory framework launched in 2009: https://finance.ec.europa.eu/consumer-finance-and-payments/payment-services/e-money_en
[5] Security: https://www.certik.com/resources/blog/security-risks-of-stablecoins
