Reference
Glossary of stablecoin payment & compliance terms
Plain-English definitions of the concepts behind compliant cross-border stablecoin payments — from the Travel Rule and KYC/KYB/KYT to correspondent banking, settlement finality and ISO 20022.
- Stablecoin
- A digital token designed to hold a stable value by referencing an external asset, most commonly a fiat currency such as the US dollar. Fiat-backed stablecoins (for example USDC and USDT) are redeemable against reserves and are used in payments as a fast, programmable settlement instrument.
- Correspondent banking
- An arrangement in which one bank holds accounts and provides payment services on behalf of another, allowing institutions without a direct presence in a market to move money there. Cross-border payments often pass through several correspondents in sequence, adding fees, FX spreads and settlement delay.
- Nostro and vostro accounts
- The accounts banks hold with one another to settle correspondent payments. A nostro account is the account a bank holds in a foreign currency at another bank; a vostro account is that same account viewed from the holding bank. Pre-funding these accounts ties up liquidity across currencies and corridors.
- De-risking
- The practice of financial institutions exiting or restricting relationships with classes of customers — frequently money service businesses — rather than managing the associated compliance risk individually. De-risking can strand licensed, compliant businesses without banking access and push remittances into less transparent channels.
- FATF Travel Rule (Recommendation 16)
- A Financial Action Task Force standard requiring that originator and beneficiary information travel with a funds or virtual-asset transfer between obliged institutions. It applies to qualifying stablecoin transfers in substantially the same way it applies to traditional wires, and the required data must accompany the transfer rather than be reconstructed afterward.
- KYC (Know Your Customer)
- The process of verifying the identity of an individual customer, typically through identity documents, proof of address and screening against sanctions, PEP and adverse-media sources. KYC establishes who a customer is at onboarding and is refreshed on a risk-based schedule.
- KYB (Know Your Business)
- Due diligence applied to legal entities rather than individuals. KYB verifies registration and good standing, maps ownership structure, and identifies ultimate beneficial owners so the people behind a corporate counterparty can themselves be screened.
- KYT (Know Your Transaction)
- The ongoing monitoring of transactions — amounts, frequency, counterparties, geographies and, on blockchain rails, wallet exposure — to detect structuring, sanctions evasion and links to illicit activity. KYT observes behaviour over time, complementing the point-in-time identity checks of KYC and KYB.
- Sanctions screening
- Checking the parties to a payment — and, on chain, the settlement wallet address — against sanctions and watchlists maintained by authorities such as OFAC, the UN, the EU and the UK. When settlement is near-instant and irreversible, screening must run in-flight before value is released rather than after the fact.
- PEP (Politically Exposed Person)
- An individual entrusted with a prominent public function, who therefore presents a higher risk of involvement in bribery or corruption. PEP screening flags such individuals for enhanced due diligence even when they do not appear on a sanctions list.
- Adverse media screening
- Searching news and other public sources for negative information about a customer or counterparty — for example links to financial crime, fraud or sanctions evasion — as an additional risk signal alongside sanctions and PEP screening.
- VASP (Virtual Asset Service Provider)
- A business that conducts virtual-asset activities such as exchange, transfer or custody on behalf of customers. Under FATF standards, VASPs carry AML and Travel Rule obligations comparable to those of traditional financial institutions.
- MSB (Money Service Business)
- A business that provides money transmission or related services, such as remittances and currency exchange. MSBs are regulated for anti-money-laundering purposes and are frequent targets of bank de-risking.
- AML (Anti-Money Laundering)
- The framework of laws, regulations and controls intended to prevent the disguising of illicitly obtained funds as legitimate. In payments, AML programmes combine customer due diligence (KYC/KYB), transaction monitoring (KYT), screening and regulatory reporting.
- SWIFT MT
- The legacy SWIFT message standard (for example MT103 for a customer credit transfer) used by financial institutions to exchange payment instructions. MT messages are gradually being migrated to the richer ISO 20022 MX format.
- ISO 20022 (SWIFT MX)
- A modern, structured messaging standard for financial transactions, adopted by SWIFT as the MX message family. Its structured fields carry originator, beneficiary, purpose and regulatory data discretely, which maps cleanly onto the data a compliant on-chain transfer requires.
- Settlement finality
- The point at which a payment is irrevocable and the received funds are available for onward use. For stablecoin settlement, finality depends on the underlying ledger and the token’s redemption model rather than on a central settlement bank, so institutions define a confirmation policy per network.
- SAR / CTR
- Regulatory reports filed by obliged institutions. A Suspicious Activity Report (SAR), known in some jurisdictions as a Suspicious Transaction Report (STR), flags activity that may indicate financial crime; a Currency Transaction Report (CTR) records cash transactions above a threshold. Examiner-ready generation of these reports is a core compliance function.
See these concepts in practice
StableNet brings the Travel Rule, KYC/KYB/KYT and sanctions screening together with real-time settlement and SWIFT MT/MX messaging on one platform.