Money with a Memory
Pascal Bouvier | MiddleGame Ventures | September 2026
Money can retain a record of its movements, expose information about its holders, and remain subject to an issuer’s intervention. These are distinct properties. What we examine in this article is what happens when persistent transaction records and continuing issuer control at the most granular level operate together in a programmatic way. The starting point is a specific kind of money, namely banknotes.
No memory
In 1758, Lord Mansfield ruled in Miller v Race that a stolen banknote once “paid away fairly and honestly upon a valuable and bona fide consideration” could not be recovered by its original owner. This ruling made banknotes money rather than goods. Before Miller v Race a banknote was a promise on paper and a promise can be traced. After Miller v Race, banknotes became fungible without any memory of where they had been since being printed. This property of forgetfulness was a legal achievement rather than a defect. Forgetfulness is what makes money so easy and cheap to use. Indeed, a currency that remembers where it has been, where it has travelled, where it has vacationed, where it has been put to use is a currency where every recipient must audit an entire historical chain before accepting it. This does not make money cheap to use anymore.
Bringing back memory
In July 2025, the GENIUS Act codified memory back into money. Section 5901(16) defines a lawful order as “any final and valid writ, process, order, rule, decree, command, or other requirement issued or promulgated under Federal law, issued by a court of competent jurisdiction or by an authorized Federal agency pursuant to its statutory authority, that (A) requires a person to seize, freeze, burn, or prevent the transfer of payment stablecoins issued by the person; (B) specifies the payment stablecoins or accounts subject to blocking with reasonable particularity; and (C) is subject to judicial or administrative review or appeal as provided by law.” Section 5903(a)(6)(B) then makes the capability a condition of existence: “A permitted payment stablecoin issuer may issue payment stablecoins only if the issuer has the technological capability to comply, and will comply, with the terms of any lawful order.”
Interestingly enough, the Bank for International Settlements (BIS) saw this memory angle some time ago. The BIS observed in its 2025 Annual Economic Report that “stablecoin holdings are tagged with the name of the issuer, much like private banknotes circulating in the 19th century Free Banking era in the United States”. The BIS went on to argue that such tags undermine the singleness of money. In other words, a “regulated“ dollar in the form of a dollar stablecoin (dare we say a regulated euro too) will remember everything. The tag at the beginning of the stablecoin’s journey is the first memory artifact. The freeze, should it come about, is the second memory artifact. The burn is the last and third memory artifact. Memory all the way down… or up. One question remains from the BIS analysis: how does continuing issuer control affect the holder’s confidence that a token will remain usable?
Two rulemakings translate the GENIUS Act into product requirements. In April 2026, FinCEN and OFAC proposed that permitted issuers be able to block, freeze and reject transactions not only for their own customers but across the secondary market, and maintain a complete sanctions-compliance program. In August 2026, the Treasury proposed a rule that defined who was able to offer stablecoins to Americans, thereby effectively controlling foreign issuers too.
Anything new under the sun?
In all fairness, bank deposits have always been seizable. Courts lawfully garnish accounts, banks lawfully freeze them, and generic sanctions laws bind every financial institution in the USA or Europe.
Although this is true, we should note several differences or novelties.
First, while a bank can freeze what it holds, a stablecoin issuer can freeze a balance sitting in a wallet which the holder of said wallet controls, on a public network, in a country where the stablecoin issuer does not operate. It is as if self-custody, a cornerstone of “crypto money” and blockchain technology, were wiped out with the stroke of a pen. Reach is almost absolute.
Second, the Treasury rule mentioned above binds foreign issuers that want to reach American users to “any reciprocal arrangement”, and the Act’s designation process reaches even those foreign issuers that never set foot in the United States, by cutting them off from American liquidity. In other words, a token holder living in Lagos or Buenos Aires who has no relationship with any American institution is within the reach of a US federal order. We should note that correspondent banking never worked that way: a Nigerian bank could freeze a deposit it held. Washington could not act through the deposit itself.
Third, and this is the most subtle, traditional freezing happened after the fact. Under the GENIUS Act and its operationalized rulemakings, the technical ability of a stablecoin platform must include freezing solutions prior to a single token being issued. Even if money was subject to being seized or frozen across the ages, being seizable by design was never a condition of being money.
Potential Consequences
Sanctions used to be instruments aimed at states or institutions or named persons. Sanctions are now rolled out to retail at scale. The velocity of sanctions rises to the velocity of payments. Enforcement becomes automatic once a restriction is embedded in the system.
Emerging markets participants are the ones most exposed. Holders in emerging markets are now holding an instrument another state can switch off. Given the popularity and growth of stablecoins for all kinds of payment use cases, both retail and business, we do not think the market has priced and digested the US-enforced memory function. How trust will develop towards stablecoins will in great part be influenced by how Washington enforces its new sets of rules.
The value of money with memory may differ from money without memory. Someone has to pay for screening, constant monitoring, constant auditing. To be more precise, compliance obligations can extend beyond an issuer’s direct customers, but their scope differs by obligation. The economic question is how much additional screening, intervention and dispute handling issuers and intermediaries must undertake – and who ultimately bears the cost.
Additionally, as we have argued in one of our previous analyses, see here, how this memory property will be enforced goes back to how the current US administration is viewing the financing of its deficits via stablecoins. We should add that further controls may increase confidence by supporting lawful recovery and lawful enforcement. The commercial question is whether market participants will view them as proportionate, predictable and whether mistakes can be corrected swiftly. Overreach will de facto kill confidence.
Four monies, four memories
What about the EU?
MiCA regulates reserves, redemption rights and conduct of e-money token issuers. EU sanctions bind every European issuer to freeze assets of listed persons just as OFAC binds American issuers. European issuers screen and freeze assets too. There is however a material difference in how public digital money is designed. In June 2026, the European Parliament’s ECON committee approved the digital euro with an offline mode built for cash-like privacy. This means that the details of one’s offline payments are known to only the sender and the recipient, and for online payments, data details would be pseudonymized. Christine Lagarde framed this in sovereignty terms: digital payments in Europe are, in her words, “largely dependent on the goodwill of a few foreign providers”.
The resulting situation is simple; the EU has one of the only product designs on the table which tries to preserve the essence of Lord Mansfield’s rule in digital form. This could mean that one of the euro’s advantages is that it can be designed to forget. Let us hope this design survives the inevitable negotiations between the Parliament, the Council, the ECB and Europe’s banks — and the pressure from Washington that will accompany them.
Further, let us also hope this framework will be adopted for private stablecoins and private stablecoin issuers based in the EU.
Who wins?
Although it is too early to tell, we will still venture a few predictions.
Privacy-preserving compliance may be a winner: technology that lets a screening engine work on encrypted transaction data; provenance and verification tools; regulated venues and regulated actors that manage memory professionally; and identity rails such as the EU Digital Identity Wallet, which let holders prove an attribute without surrendering their entire identity. Further, euro-denominated instruments could prove attractive (think tokenized deposits, MiCA e-money tokens), assuming market traction.
MiddleGame Ventures’ Stance
We believe the opportunity lies in infrastructure that makes compliance effective, intervention accountable and unnecessary data exposure avoidable. The critical questions are who can restrict access to money, under what authority and with what remedy when something goes wrong.
We are naturally attracted to a) compliance infrastructure solutions that promote less data disclosure, b) platforms or solutions that will build resilience to issuer restrictions such as exposure mapping, payment continuity plans and liquidity management and c) post-freeze management solutions such as investigation, evidence gathering, appeals and restoration processes.
We are convinced that European unicorns can potentially grow out of smart, digital euro money infrastructure, whether born out of the digital euro, or euro stablecoins.
We also believe certain portfolio actions are in order and will map our startups against exposure to dollar token rails and ask each what happens the day one of its customers is frozen.
We think potential LPs based out of Europe at large and the EU more specifically should be made aware of the benefits of forgetful public or private money.
Finally, we will continue to monitor what comes out of FinCEN/OFAC and the US Treasury and whether the digital euro’s design will survive what are sure to be tight negotiations in Brussels and Frankfurt, under pressure from Washington. How much will the dollar be able to remember and how much will the euro be able to forget will be key in our minds going forward.
Selected references
[1] Miller v Race (1758) 1 Burr 452, Lord Mansfield — case summary. https://swarb.co.uk/miller-v-race-1758/
[2] GENIUS Act, Public Law 119-27, enacted July 18, 2025 — full text. https://www.govinfo.gov/content/pkg/PLAW-119publ27/html/PLAW-119publ27.htm
[3] 12 U.S.C. Chapter 56, Regulation of Payment Stablecoins (GENIUS Act as codified): §5901(16), §5903(a)(6)(B), §5903(a)(11). https://uscode.house.gov/view.xhtml?path=/prelim@title12/chapter56&edition=prelim
[4] BIS. Annual Economic Report 2025, Chapter III, “The next-generation monetary and financial system.” June 2025. https://www.bis.org/publ/arpdf/ar2025e3.htm
[5] FinCEN and OFAC. Notice of proposed rulemaking on anti-money-laundering and sanctions-compliance requirements for permitted payment stablecoin issuers. April 8, 2026. https://www.fincen.gov/system/files/2026-04/PPSI-AMLCFT-NPRM.pdf
[6] Sullivan & Cromwell. “GENIUS Act Implementation — FinCEN, OFAC Propose Rule on AML and Sanctions-Compliance Requirements.” April 2026. https://www.sullcrom.com/insights/memo/2026/April/GENIUS-Act-Implementation-FinCEN-OFAC-Propose-Rule-AML-Sanctions-Compliance-Requirements
[7] U.S. Department of the Treasury. “GENIUS Act Regulations on Payment Stablecoin Issuance, Offer, and Sale” (NPRM). Federal Register, August 18, 2026. https://www.federalregister.gov/documents/2026/08/18/2026-16796/genius-act-regulations-on-payment-stablecoin-issuance-offer-and-sale
[8] Gibson Dunn. “The GENIUS Act: A New Era of Stablecoin Regulation.” July 2025 (Section 18 foreign-issuer designation process). https://www.gibsondunn.com/the-genius-act-a-new-era-of-stablecoin-regulation/
[9] Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA). https://eur-lex.europa.eu/eli/reg/2023/1114/oj
[10] European Central Bank. “Digital euro — Privacy.” Design statements, accessed September 2026. https://www.ecb.europa.eu/euro/digital_euro/features/privacy/html/index.en.html
[11] CoinDesk. “The EU Parliament approves digital euro framework to counter U.S.’s payment monopoly.” June 23, 2026 (ECON committee vote; Lagarde quotation). https://www.coindesk.com/policy/2026/06/23/european-parliament-clears-last-step-for-a-digital-euro-to-break-u-s-payment-grip
[12] Bouvier, P. “The Dollar’s Waning Privilege.” MiddleGame Ventures, August 2026. https://www.middlegamevc.com/articles/the-dollars-waning-privilege/