Bank stablecoin for 3.3 million users: “crypto assets are generally not protected”

When your bank issues a stablecoin, your money no longer sits in an account. It sits in a token. That changes everything for the statutory deposit guarantee, because the guarantee does not cover that balance. On its consumer page on deposit protection, German regulator BaFin puts it plainly: crypto assets are “generally not protected”. What you get instead is a redemption claim against the issuer.

Since October 23, 2026, that is no longer a theoretical question. On that day a major bank placed its own stablecoin inside a payment app with millions of users. In Germany, banks are working on a euro equivalent. Understand the difference between an account balance and a token now, and you will not have to learn it later in a loss event.

RedCoin: what HSBC switched on in the PayMe app on October 23

HSBC switched on the RedCoin stablecoin, ticker RCHKD, inside its PayMe payment app on October 23, 2026. The token is pegged to the Hong Kong dollar and is meant to be redeemable one for one, subject to the issuer's terms. It is issued by The Hongkong and Shanghai Banking Corporation, which received a licence as a stablecoin issuer from the Hong Kong Monetary Authority in April 2026 under the territory's stablecoin ordinance. Decrypt and other trade outlets reported the launch.

A stablecoin is a token whose value is tied to a fixed reference, usually a state currency. The number quoted in the reports is easy to overstate: the 3.3 million figure refers to existing users of the payment app, not to people who have already activated a token wallet.

Three points from the launch terms matter here. First, the token runs on the bank's own ledger, not on a public blockchain. Second, balances cannot move freely between the payment app and the bank's banking app. Third, according to the bank's documentation the token wallet is not an ordinary deposit account, which is why the Hong Kong deposit protection scheme does not apply to it. The bank also plans to let customers subscribe to units of a tokenised money market fund from 100 Hong Kong dollars using the token.

Hard reserve figures do not exist yet. The numbers published shortly after launch come from the issuer itself and are unaudited; the bank expects a first report after the fourth quarter of 2026. Until then it is assertion against evidence.

E-money tokens under MiCA: only credit institutions and e-money institutions may issue them

In the EU such a token is called an e-money token, EMT for short: a crypto asset that references the value of a single official currency and is treated as electronic money in supervisory law. BaFin states the entry rule briefly: “Only credit institutions or e-money institutions may issue e-money tokens (EMT)” or apply for admission to trading for such tokens. A fintech without a banking licence cannot put a euro token on the market in the EU at all.

That is exactly where the misunderstanding starts. Because a bank stands behind the token, the balance reads like a bank account. In supervisory law it is not one. In its guidance on authorisation requirements, BaFin classifies e-money tokens as electronic money within the meaning of the Second E-Money Directive. Electronic money is its own category with its own safeguards, and deposit protection is not among them.

There is also a procedural part you can look up as an investor. For every e-money token the issuer must file a crypto-asset white paper under Article 51 of the MiCA regulation with BaFin, with a copy going to the competent centre at the Deutsche Bundesbank. No approval of the white paper is foreseen; what counts are the deadlines named in the supervisor's guidance. We have written up what the licence itself requires of companies in our overview of MiCA obligations for crypto firms.

Deposit protection in Germany: 100,000 euros per customer and bank

The deposit guarantee is the statutory compensation that applies when a bank can no longer repay its customers' deposits. As BaFin describes it, the scheme covers account balances, fixed-term deposits and savings deposits, meaning money in current, overnight and term accounts. The statutory claim is capped at 100,000 euros per customer and bank, regardless of how many accounts they hold. On joint accounts each holder has their own claim, and in special cases the protection rises to as much as 500,000 euros for six months.

The supervisor also names what is not a deposit and therefore not covered: bearer and order bonds, profit-participation liabilities and liabilities from the bank's own bills of exchange. The same overview carries the sentence that decides the matter for token balances, namely that crypto assets are generally not protected. Securities such as shares or fund units also fall outside the scheme, but they remain the customer's property and are held in custody.

On process: BaFin determines the compensation event, and for deposits up to 100,000 euros compensation is paid on the basis of the bank's records within seven working days. That machinery runs for deposits. For a token balance it does not run at all.

Account balance or token: the difference that decides the protection case

Picture two positions at the same bank. The current account holds 5,000 euros, and the app holds 5,000 euros as a bank token. While everything works, the two behave identically: you can pay, transfer and exchange. The difference shows up only in the one moment when it counts.

If the bank fails, the current account is a case for statutory compensation up to 100,000 euros. The token balance is a claim against the issuer, governed by the token terms and by insolvency law. No guarantee fund pays you out within seven working days here. Whether and when you see your money depends on how the reserve was held and how it is treated in the proceedings.

That is why “does the stablecoin come from a bank?” is the wrong question. The right one is: do I hold a deposit or a token? Both can sit side by side in the same institution, the same app and the same screen. For which stablecoins exist, how they are backed and where you can trade them, see our stablecoin comparison.

Redemption right: the claim against the issuer replaces the guarantee fund

The redemption right is the claim to exchange the token back into the underlying currency at par at any time. It is the heart of e-money token regulation and the actual substitute for deposit protection. For RedCoin the bank names a one-for-one redemption, though subject to the terms in force at the time.

That qualifier deserves a close read, because the quality of the promise is decided there. Check whether redemption happens at par or at the market price, whether a fee applies, how long the payout takes, which channel it runs through, and whether minimum or maximum amounts apply. A redemption right that works through a single app only is weaker than one that keeps several routes open.

A second point comes from European regulation: simply holding a regulated e-money token pays no interest. If you expect a yield, you are looking in the wrong place. The token is a payment instrument, and its value lies in settlement, not in return.

Reserve backing: where the money behind an e-money token sits

The reserve backing is the assets with which the issuer backs the tokens in circulation. For holders, the location matters more than the total: is the reserve held as deposits at credit institutions, in short-dated government paper, or in less liquid assets? That determines how quickly the issuer can serve a wave of redemption requests.

There is an irony in the construction worth knowing. Part of an e-money token's reserve is itself typically held as deposits at banks, and those deposits belong to the issuer, not automatically to you in an insolvency. The protection works at the issuer's level, not at yours.

Publications are what make this checkable. For RedCoin the figures shortly after launch are issuer statements without an audit, and the first report is expected after the fourth quarter of 2026. The same principle applies to every euro token offered to you in Germany: without a regular, audited report, the backing remains an assertion. When a peg to par breaks, the cause almost always sits in the backing, not in trading.

ESMA register and white paper: how to check an issuer's authorisation yourself

You do not have to take the marketing on trust, you can look it up. The European Securities and Markets Authority, ESMA, keeps a register of all authorised issuers of e-money tokens, and BaFin points to it explicitly on its page about token issuance. If a provider is not listed there, authorisation for that token is missing in the EU, however familiar the name on the app may be.

The second step is the white paper. It has to describe the backing, the redemption right and the risks, and it is the document the issuer will be measured against later. If you want to know how to reconcile register and authorisation in practice, our guide to checking MiCA authorisation sets out the route.

Hong Kong and the EU: two supervisory regimes, one identical message on protection

The two legal orders are not comparable, and their licences do not apply to one another. On one point they nevertheless say the same thing. In Hong Kong, the bank's documentation makes clear that the token wallet is not an ordinary deposit account and that the local deposit protection scheme does not apply. In Germany, BaFin lists crypto assets in its overview as generally not protected.

That means the sentence buried in the small print in Hong Kong is not an oddity in the EU but the rule. Anyone handed a euro token from a German bank should not expect the 100,000 euros to travel with it. They will not, because the token is not a deposit.

The takeaway: a bank stablecoin moves your balance out of a category with statutory compensation and into a category with a contractual redemption claim. That can be perfectly fine if you use the token to pay and not to park larger sums. It was not built as a replacement for a savings account.

Bank stablecoin: without deposit protection, only redemption counts

1. Settle the category before you move money. Check the terms to see whether your balance is an account balance or a token, and keep larger sums where statutory compensation applies. Our overview of regulated crypto exchanges shows where you can hold euro balances with authorised providers.
2. Test the redemption route before your first purchase. Redeem a small amount and measure how long it takes and what it costs, rather than trying it for the first time when it matters. For everyday spending from a crypto balance, it is worth comparing crypto credit cards.
3. Read up on issuer and reserve once a quarter. Match the provider against the ESMA register and check whether an audited reserve report exists. Holdings you intend to keep long term belong in your own custody anyway; the devices for that are in the hardware wallet comparison.

(As of October 29, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)