What is a stablecoin?

A stablecoin is a type of cryptocurrency designed to hold a steady value rather than swing in price the way Bitcoin or Ethereum do. In practice that almost always means a token engineered to trade at one US dollar — you put in a dollar, you get one stablecoin, and you expect that stablecoin to be worth a dollar whenever you want to redeem it. So when people ask what is a stablecoin, the short answer is: a digital dollar that lives on a blockchain. A handful of stablecoins instead track the euro, the pound, gold, or other reference assets, but dollar-pegged tokens dominate the market by a wide margin.

The “stable” in the name is doing the real work. A regular cryptocurrency can rise or fall double-digit percentages in a single day. That volatility is fine if you are speculating, but it makes ordinary money tasks awkward or risky: paying someone, parking funds between trades, settling an invoice. A stablecoin keeps the convenience of crypto (it settles in minutes, moves across borders without a bank, and plugs into smart contracts) while stripping out the price swings. It is meant to behave like cash, not like a bet.

Why stablecoins exist

Stablecoins solve three problems at once. The first is a volatility bridge. Traders who want to step out of a volatile position without leaving the crypto ecosystem can move into a stablecoin instead of cashing out to a bank. They lock in dollar value, stay on-chain, and can re-enter the market instantly, with no wire transfers and no waiting for bank hours. On most exchanges the deepest, most-traded order books are crypto-to-stablecoin pairs rather than crypto-to-fiat, which makes stablecoins the default unit of account for trading.

The second is settlement. Because a stablecoin is just a token on a public blockchain, it can be sent anywhere in the world, at any hour, and arrive in seconds to minutes for a fee that is usually a fraction of what a traditional cross-border transfer costs. That makes stablecoins useful for remittances, for businesses paying overseas suppliers, and for moving large sums between exchanges or trading desks. The money settles on the chain itself, without a correspondent-banking chain in the middle.

The third is on-chain dollars for decentralized finance (DeFi). Lending protocols, decentralized exchanges, and other smart-contract applications need a stable unit to denominate loans, collateral, and prices. A loan made in a volatile coin could be wiped out by price moves before it is even repaid; a loan made in a stablecoin behaves like a normal dollar loan. Stablecoins became the base layer of dollar liquidity that most of DeFi is built on, and they are the asset people most often deposit to earn yield.

How big is the stablecoin market?

Stablecoins are no longer a niche corner of crypto. The total value of all stablecoins in circulation now runs into the hundreds of billions of dollars — the live figure is shown in the hero panel at the top of this page and updates as the market moves. That capital represents real dollars (and dollar-equivalent assets) that issuers hold in reserve against the tokens they have issued. Day to day, stablecoins routinely settle enormous transaction volume on-chain, frequently rivaling or exceeding the throughput of established card networks on the busiest days, because they are the medium most crypto trading and DeFi activity flows through.

It helps to be precise about what a stablecoin is not. It is not a bank deposit: holding a stablecoin is not the same as having insured money in a bank, and in most cases there is no government deposit guarantee standing behind it. It is not a guaranteed-return investment, and a credible stablecoin issuer does not promise that the token will go up — only that it will stay near a dollar. And the peg is a design goal, not a law of nature. A stablecoin holds its value because of the reserves and mechanisms behind it, and when those mechanisms fail, the peg can break. The sections below explain how the peg is maintained, the different types of stablecoins and how their risks differ, and what has happened in the cases where a stablecoin lost its dollar value.

How stablecoins hold their peg

A stablecoin trades near a dollar because something credible stands behind it and because traders are paid to push the price back to a dollar whenever it drifts. Different stablecoins use different machinery, but every durable peg comes down to two ingredients: a backing asset that gives the token real value, and an arbitrage incentive that closes the gap between the market price and the target. Understanding both explains why some stablecoins hold their peg through stress and others collapse.

1:1 reserves and redemption

The most common and most straightforward mechanism is full reserve backing. For every token the issuer puts into circulation, it holds roughly one dollar of reserves: cash in bank accounts plus short-term US Treasury bills and similar low-risk instruments. The promise is simple: an authorized party can always create new tokens by sending the issuer a dollar (minting) and redeem tokens for a dollar back (redemption). Those reserves are what make the token worth a dollar; the redemption right is what keeps the market price there.

This is where arbitrage does the work. Suppose the token slips to $0.99 on an exchange. An arbitrageur can buy it cheaply at $0.99, redeem it with the issuer for a full $1.00, and pocket the difference. That buying pressure pushes the market price back up. Now suppose the token trades at $1.01. Arbitrageurs mint fresh tokens from the issuer at $1.00 and sell them into the market at $1.01, and that selling pressure pushes the price back down. As long as minting and redemption are open and reliable, the round-trip to the issuer acts like a magnet that holds the price at a dollar. The reserves are the anchor; arbitrage is the chain that connects the market price to it.

Over-collateralization (crypto-backed)

Some stablecoins are not backed by dollars in a bank but by other crypto assets locked in a smart contract. Because crypto collateral is itself volatile, these systems deliberately hold more than a dollar of collateral for every dollar of stablecoin issued — this is over-collateralization. A user might lock $150 or more of crypto to mint $100 of stablecoin. That cushion absorbs swings in the collateral’s price so the stablecoin stays fully backed even when markets fall.

If the collateral’s value drops too far toward the amount of stablecoin it backs, the protocol automatically liquidates it — the collateral is sold (or auctioned) to buy back and retire the outstanding stablecoin before the position goes underwater. The peg here is maintained by the combination of an over-collateralized cushion, automatic liquidations that keep the system solvent, and arbitrage around the contract’s own mint-and-burn mechanics. It is more complex than holding dollars, but it keeps the whole arrangement on-chain and transparent.

Algorithmic supply control

A third approach tries to hold the peg with little or no hard collateral, instead using code to expand and contract the token supply. When the price is above a dollar, the protocol mints more tokens to push it down; when the price is below a dollar, it tries to remove tokens from circulation to push it up — often by letting holders swap the stablecoin for a separate “volatility” token at a guaranteed dollar of value. The arbitrage incentive is the same idea as elsewhere, but the thing standing behind the peg is a market mechanism and confidence rather than a reserve of real assets.

This design is the most fragile. It depends on continuous demand and on traders believing the mechanism will work. If confidence breaks and everyone tries to exit at once, the supply mechanics can spiral instead of stabilize — the protocol mints enormous quantities of the companion token, that token’s value collapses, and the stablecoin falls with it. The 2022 failure of TerraUSD (covered later on this page) is the textbook example of an algorithmic peg unwinding. The lesson the market drew was blunt: arbitrage incentives only hold a peg when there is something solid for arbitrage to redeem against.

The role of the arbitrageur

Across every model, the common thread is the arbitrageur — the trader (often an automated bot) who profits by closing the gap between the market price and a dollar. Arbitrageurs are not doing the issuer a favor; they are chasing a risk-light profit, and in doing so they continuously nudge the price back to target. The crucial question for any stablecoin is therefore not just “is there a peg?” but “what can the arbitrageur actually redeem for, and will that redemption still work under stress?” When the answer is real, liquid reserves with open redemption, pegs tend to hold; when the answer is only an algorithm and a hope, they can fail.

Types of stablecoins

Two tokens can both trade at exactly a dollar and yet be backed by completely different things: one by cash in a bank, another by volatile crypto, another by nothing but code. That is the part that matters, because the backing is what decides where the risk sits. Below are the main types, with real examples, followed by a side-by-side comparison.

Fiat-collateralized stablecoins

These are the most common and the simplest to understand. Each token is backed by reserves of cash and cash-equivalent assets (primarily short-term US Treasury bills and bank deposits) held by a centralized issuer. The two largest stablecoins in the world, Tether (USDT) and USD Coin (USDC), are both fiat-collateralized. You trust the issuer to actually hold the reserves and to honor redemptions, and reputable issuers publish regular attestations or reserve reports so the backing can be independently checked. The strength of this model is that the backing is real, liquid dollars; the trade-off is that you are relying on a company and its banking partners (counterparty and custodian risk), as the USDC episode in 2023 demonstrated.

Crypto-collateralized (over-collateralized) stablecoins

Instead of dollars in a bank, these are backed by other crypto assets locked in smart contracts, and because that collateral is volatile they hold more than a dollar of it per dollar issued. The best-known example is DAI, issued by the MakerDAO/Sky protocol, where users lock crypto collateral to mint DAI and the system auto-liquidates positions that fall too close to their backing. The appeal is decentralization and on-chain transparency — you can verify the collateral yourself and no single company custodies your dollars. The trade-offs are capital inefficiency (you must lock up more value than you mint), exposure to sharp collateral crashes, and smart-contract risk. In practice, several over-collateralized stablecoins also hold a portion of their backing in fiat-backed stablecoins or tokenized real-world assets to steady the peg.

Algorithmic stablecoins

Algorithmic stablecoins try to hold the peg through supply-adjusting code and market incentives, with little or no hard collateral. The case that defines the category is TerraUSD (UST), which relied on a mint-and-burn mechanism with its sister token LUNA rather than reserves. In May 2022, UST lost its dollar peg under heavy redemptions; the mechanism designed to defend it instead hyperinflated LUNA, and both tokens collapsed toward zero within days, erasing tens of billions of dollars. UST is the reason the entire “purely algorithmic” category is now treated with deep skepticism. (Note: some newer dollar tokens that use hedging strategies are sometimes loosely called “algorithmic,” but they hold real collateral and are not the reserve-free design that UST was.)

Commodity-backed stablecoins

Some stablecoins are pegged not to a dollar but to a physical commodity — most often gold. PAX Gold (PAXG) is a well-known example, where each token represents ownership of a specific quantity of physical gold held in vaults. Strictly speaking these track the spot price of the commodity rather than holding a fixed dollar value, so a gold-backed token rises and falls with the gold price. They are “stable” only relative to that commodity, and they let holders own and transfer gold exposure on-chain without storing the metal themselves.

Yield-bearing and tokenized-treasury tokens

A newer category sits between a stablecoin and an investment fund: tokens backed by short-term US Treasuries that pass the underlying Treasury yield through to holders. Ondo Finance’s USDY and Circle’s USYC are examples. The important distinction is that these typically target a net asset value (NAV) reflecting the value of their Treasury holdings rather than a strict, fixed $1.00 peg — many of them are designed so the token price gradually accrues upward as interest is earned, rather than staying pinned at a dollar. Because they pass through yield, regulators often treat them as securities or fund interests rather than as simple payment stablecoins, and access is frequently restricted (for example, to non-US or accredited investors). They are covered in more detail in the yields section below.

When you hold a stablecoin you are really holding a claim on whatever sits in that table’s “backing” column, and the “key risk” column is what can go wrong. A fiat-backed token is only as safe as its reserves and the banks holding them. A crypto-backed token rises and falls with its collateral and its code. An algorithmic token depends on confidence that can evaporate. The categories are not ranked best-to-worst; each carries a different failure mode, which is why the comparison above pairs every backing model with the specific way it can break.

The stablecoin market today

The stablecoin market has grown into one of the largest and most important segments of crypto, with a total stablecoin market cap measured in the hundreds of billions of dollars. The headline figure — shown live in the stat strip at the top of this page and in the chart just below — represents the combined value of every dollar (and dollar-equivalent) token in circulation, backed by the reserves and collateral their issuers hold. It is one of the clearest gauges of how much real money has moved on-chain, and it tends to rise when crypto activity, trading and DeFi demand are expanding.

The defining feature of this market is concentration. A small number of issuers account for the overwhelming majority of all stablecoin value: Tether’s USDT is the largest by a wide margin, Circle’s USDC is the clear second, and together those two fiat-backed dollar tokens dominate both supply and trading volume. The market-share donut below visualizes that split — you will typically see USDT and USDC filling most of the ring, with everything else sharing a comparatively thin remainder. The rest of the field is a long tail of smaller but meaningful tokens: the decentralized, crypto-collateralized DAI; the synthetic dollar USDe; payment-company tokens like PYUSD; newer regulated entrants such as RLUSD and USD1; and a wide range of others tracked in the table.

The two visualizations and the ranked table below are built to be explored rather than read off as fixed numbers. The market-cap trend chart plots total stablecoin supply over roughly the past year, so you can see whether the market as a whole is growing, flat or contracting — expansion signals capital flowing into on-chain dollars, while a sustained decline often coincides with crypto deleveraging. The issuer market-share donut shows who holds that supply right now, making the dominance of the leaders — and the size of the competitive tail — immediately visible. And the full list of stablecoins in the ranked table breaks the market down token by token, with market cap, share, current price, peg deviation, backing type and the chains each one runs on. You can sort the table by any column to surface, say, the largest tokens, the widest peg deviations, or a particular backing model.

The peg-deviation column is worth knowing how to read, because it is the quickest health check in the table. Every dollar stablecoin is meant to trade at exactly $1.00, so the figure shown is simply how far the live price sits from that target, expressed as a percentage. A reading at or near 0% means the token is holding its peg normally; a small deviation of a fraction of a percent is routine market noise and nothing to worry about; a larger gap — especially a token trading meaningfully below a dollar — can be an early sign of stress, a liquidity problem, or in rare cases the start of a depeg. (A handful of yield-bearing tokens are designed to drift above $1 as interest accrues, so a deviation there is expected rather than a warning.) Taken together, these live widgets turn an abstract market into something you can actually inspect: how big it is, who runs it, and whether each token is behaving as it should right now. The figures update as the market moves, so treat the live values on the page — not any number written into the prose — as the current state of play.

The major stablecoins

The stablecoin market is highly concentrated: a handful of issuers account for the overwhelming majority of all value in circulation, and the ranked live table above shows exactly where each token sits today. Below are short profiles of the eight most important dollar stablecoins, covering what backs each one, who issues it and how its risk model differs, each with a link to its live STnews data page. Market caps and rankings move constantly, so the figures that matter (current size, price, peg status) are on the live pages rather than hardcoded here.

Tether (USDT) — the largest stablecoin

Tether (USDT), issued by Tether Limited, is by a wide margin the largest stablecoin in the world and the most widely traded dollar token across exchanges. It is fiat-collateralized: each token is meant to be backed by reserves that today consist mostly of cash and short-term US Treasury bills, alongside smaller allocations to other assets disclosed in Tether’s quarterly reports. Tether is also one of the largest holders of US Treasuries globally, a scale that has made it a notable participant in government-debt markets.

USDT’s history includes real transparency criticism. In February 2021, Tether and its affiliated exchange Bitfinex settled an investigation by the New York Attorney General, paying an $18.5 million penalty without admitting wrongdoing and agreeing to publish regular reserve breakdowns — the origin of the quarterly attestation regime Tether still follows. (The earlier reserve composition, once heavily weighted to commercial paper, has since shifted toward Treasuries.) Tether now publishes periodic attestations from an outside accounting firm, though these are attestations rather than a full audit. USDT is the default trading and settlement token across much of crypto. See live reserve-backed price, peg and market data on the Tether (USDT) page.

USD Coin (USDC)

USD Coin (USDC) is issued by Circle and is the second-largest stablecoin. It is fully reserved in cash and short-dated US Treasuries, with the bulk of its reserves held in a regulated money-market fund, and Circle publishes monthly attestations of the backing. USDC has positioned itself as the regulatory-friendly dollar token: Circle obtained electronic-money authorization in the EU under MiCA and pursued US regulatory engagement, and the company is now publicly listed.

USDC’s defining stress test came in March 2023, when roughly $3.3 billion of its reserves were temporarily caught in the failure of Silicon Valley Bank. USDC briefly depegged to about $0.88 before US regulators backstopped SVB depositors and the token recovered its dollar peg within days — a textbook case of custodian risk rather than a flaw in the token’s design (covered in detail in the safety section above). USDC is widely used in DeFi and increasingly favored on compliant venues. See live data on the USD Coin (USDC) page.

Dai (DAI)

Dai (DAI) is the best-known decentralized, crypto-collateralized stablecoin. Rather than a company holding dollars in a bank, DAI is minted when users lock crypto collateral into smart-contract vaults run by the MakerDAO protocol (now operating under the Sky brand), and the system is over-collateralized so the token stays fully backed even when collateral prices fall. Positions that drift too close to their backing are automatically liquidated to keep the system solvent.

DAI has evolved substantially. The protocol rebranded toward Sky and introduced USDS, an upgraded stablecoin that DAI holders can upgrade to, while DAI continues to circulate. Its backing has also broadened over time to include other fiat-backed stablecoins and tokenized real-world assets (such as short-term Treasuries) to help steady the peg — a pragmatic shift that means DAI is no longer backed purely by volatile crypto. It remains a cornerstone of on-chain, verifiable dollar liquidity. See live data on the Dai (DAI) page.

Ethena USDe (USDe)

Ethena USDe is a synthetic dollar and works very differently from the tokens above — it is not fiat-backed and holds no cash or Treasuries against the bulk of its supply. Instead, USDe is backed by crypto collateral paired with an offsetting short position in perpetual-futures markets. This is a delta-neutral hedge: the long collateral and the short derivative move in opposite directions, so the combined position is designed to hold a roughly constant dollar value regardless of which way the underlying crypto price moves.

That structure is also where its yield and its risk come from. Holders who stake USDe (receiving sUSDe) can earn a return generated largely by perpetual-futures funding rates paid to the short side, plus any staking yield on the collateral. The trade-offs are specific to this model: yields fall, and the mechanism can come under pressure, when funding rates turn negative for an extended period, and the design depends on derivatives venues and execution rather than redeemable bank reserves. USDe is best understood as a hedged-position product that targets a dollar, not a reserve-backed cash token — a distinction worth keeping front of mind. See live data on the Ethena USDe page.

PayPal USD (PYUSD)

PayPal USD (PYUSD) is a dollar stablecoin issued for PayPal by Paxos, a regulated trust company. It is fully reserved, backed by US dollar deposits, short-term US Treasuries and cash equivalents, with reserve reporting published for the token. Its significance is less technical than strategic: PYUSD is a mainstream consumer-payments company bringing a stablecoin to a very large existing user base, integrated into PayPal’s wider payments ecosystem.

That mainstream-payments angle is the reason to watch PYUSD even though it is far smaller than USDT or USDC. It represents the broader trend of established fintech and payment firms issuing or embedding regulated dollar tokens, blurring the line between “crypto stablecoin” and ordinary digital money. As a Paxos-issued token it sits in the same regulated-issuer category as several other US dollar stablecoins. See live data on the PayPal USD (PYUSD) page.

Ripple USD (RLUSD)

Ripple USD (RLUSD) is the fiat-backed dollar stablecoin from Ripple, launched in December 2024. It is fully reserved in cash and cash-equivalent assets such as short-term US Treasuries, and it was issued under a New York Department of Financial Services trust-company framework, giving it a regulated US footing from the start. RLUSD is available on both the XRP Ledger and Ethereum.

The most important point about RLUSD is what it is not: it is a separate asset from XRP. XRP is a volatile, free-floating cryptocurrency with no peg, whereas RLUSD is engineered to stay at one dollar. RLUSD does not replace or compete with XRP — it gives the surrounding ecosystem a regulated dollar token to settle and transact in alongside the volatile asset. Anyone researching “is XRP a stablecoin” should keep the two firmly distinct. See live data on the Ripple USD (RLUSD) page.

World Liberty Financial USD1 (USD1)

USD1 is a fiat-backed dollar stablecoin issued by World Liberty Financial. According to the issuer, it is backed one-to-one by US dollar deposits, short-term US Treasuries and cash equivalents, with reserves held by the regulated custodian BitGo and monthly third-party attestations published for the token. It deliberately uses a simple reserve model without built-in yield mechanisms. USD1 launched in 2025 and is available across multiple blockchains.

USD1 has political associations through its issuer; in keeping with this page’s neutral, factual approach, the only points stated here are the verified mechanics — issuer, reserve model, custodian and attestation practice — and not any commentary on those associations. As with any newer token, the structural considerations a holder would weigh are the concentration of custody and the track record of a young issuer relative to the longest-established stablecoins. See live data on the World Liberty Financial USD1 page.

First Digital USD (FDUSD)

First Digital USD (FDUSD) is a fiat-backed dollar stablecoin issued by First Digital, a Hong Kong-based group, with reserves reported to be held in short-term US Treasury bills and cash equivalents and examined in periodic attestations. FDUSD grew quickly into a widely used trading stablecoin, with much of its circulation concentrated on a single major exchange — a structural concentration worth noting.

In April 2025, FDUSD briefly depegged, trading as low as around $0.87 against other dollar tokens, after Tron founder Justin Sun publicly alleged that First Digital Trust was insolvent. First Digital firmly denied the claim, said FDUSD remained fully backed by US Treasury bills, and indicated the dispute related to a separate stablecoin (TrueUSD) rather than to FDUSD’s own reserves; FDUSD subsequently recovered its peg, and the matter became the subject of litigation. The episode is reported here factually and without taking a side; readers should follow current coverage for the latest. See live data on the First Digital USD (FDUSD) page.

Reading the list

Two patterns stand out across these eight. First, the market is genuinely concentrated: USDT and USDC together dominate supply and trading volume, and the remaining tokens — even fast-growing ones — are far smaller, which is why the ranked live table at the top of this section is the best way to see current proportions rather than any fixed figure. Second, “stablecoin” covers several distinct risk models: most of these are fiat-reserved (USDT, USDC, PYUSD, RLUSD, USD1, FDUSD), DAI is crypto-collateralized and decentralized, and USDe is a synthetic, hedged dollar that holds no cash reserves at all. They can all trade near a dollar while being backed by very different things.

Each live page linked above carries the current price, peg status, reserve notes and market data for that token, and that is where the figures worth acting on are found: the size of an issuer, where a token trades against its dollar target today, how its reserves are reported. Read those alongside the profiles here. A market cap or a price typed into prose is out of date by the time you read it; the same number pulled live is not.

Are stablecoins safe?

“Are stablecoins safe?” is the most important question to ask before holding one, and the answer turns almost entirely on which stablecoin you mean. None of them are risk-free. A well-run, fully reserved stablecoin has held its dollar value reliably for years and through severe market stress. But stablecoins are not bank deposits, they are generally not government-insured, and history includes both a brief wobble in one of the largest fiat-backed tokens and the total collapse of an algorithmic one. The live peg-stability monitor below flags any tracked stablecoin currently trading away from its $1.00 target; this section explains the categories of risk and looks at two real cases.

The main risks

• Reserve and transparency risk. A fiat-backed stablecoin is only as good as the assets behind it. If reserves are incomplete, illiquid, or not what the issuer claims, the peg is hollow. This is why reserve attestations and disclosures matter — a token whose backing cannot be verified carries more risk than one that publishes regular, independent reserve reports.
• Depeg risk. A stablecoin can trade below (or above) its target, sometimes sharply, during a loss of confidence, a bank failure, or a forced sell-off. A small, brief depeg may fully recover; a severe one may not.
• Counterparty and custodian risk. Fiat-backed stablecoins keep reserves at banks and with custodians. If one of those institutions fails or freezes funds, the stablecoin is exposed — even if the issuer did nothing wrong. The 2023 USDC episode below is exactly this risk.
• Regulatory risk. Rules for stablecoins are tightening worldwide. New requirements can force changes to reserves, restrict who may hold or issue a token, or limit a stablecoin in certain markets. (See the regulation section on this page.)
• Smart-contract risk. Stablecoins live in code. Crypto-collateralized and DeFi-integrated tokens depend on smart contracts that could contain bugs or be exploited, and yield strategies built on top add further contract risk.

Case study: USDC briefly depegged during the SVB failure (March 2023)

In March 2023, USD Coin (USDC) — one of the largest and most trusted fiat-backed stablecoins — briefly lost its peg. The cause was not the stablecoin’s design but its banking partners. Silicon Valley Bank (SVB) collapsed and was taken over by regulators, and Circle, USDC’s issuer, disclosed that $3.3 billion of USDC’s cash reserves were held at SVB — a meaningful slice of its backing. With those funds suddenly in question over a weekend, USDC fell off its dollar peg, trading as low as about $0.88.

The recovery is what makes the episode worth studying. US regulators announced that all SVB depositors would be made whole, Circle confirmed it could access the funds, and USDC recovered its $1.00 peg within a few days. The reserves were real; the scare was about temporary access to them, not their existence. This is the clearest illustration of counterparty/custodian risk: a fully reserved stablecoin can still depeg if the banks holding its reserves are in trouble. It also showed how confidence-driven a depeg can be, and that even a brief one can leave a mark, since USDC ceded market share to its larger rival in the aftermath.

Case study: TerraUSD (UST) collapsed to near-zero (May 2022)

The opposite outcome — a depeg that never recovered — played out with TerraUSD (UST) in May 2022. UST was an algorithmic stablecoin: rather than holding cash reserves, it relied on a mint-and-burn mechanism with its companion token LUNA to defend the dollar peg. A large amount of UST had been parked in a lending protocol paying an unusually high yield, and when sizeable withdrawals and sell-offs hit, UST slipped below a dollar and confidence cracked.

Because there were no hard reserves to redeem against, the defense mechanism backfired. As holders fled, the protocol minted enormous quantities of LUNA, LUNA’s price collapsed under hyperinflation, and that collapse dragged UST down with it — the classic algorithmic “death spiral.” Within days UST had fallen to a fraction of a dollar and then toward zero, and an estimated tens of billions of dollars of value were wiped out across UST and LUNA, with shockwaves across the wider crypto market. UST never regained its peg. It remains the defining example of why a peg backed only by code and confidence — with nothing solid to redeem against — is fundamentally fragile.

So, are they safe?

The two cases bracket the spectrum. A fully reserved stablecoin from a credible issuer is generally robust and has weathered serious stress, but it is not immune to the banking and regulatory system around it, as USDC showed. An algorithmic stablecoin with no real backing can fail completely, as UST did. The practical guidance, not financial advice, is to favor stablecoins whose reserves are real and independently verifiable, to understand that no stablecoin carries a government guarantee, and to treat any token that promises a high “risk-free” yield with particular caution — that is precisely the pattern that preceded the largest collapse in the category’s history.

Stablecoin yields & interest

Dollars sitting idle in a wallet earn nothing, and the same is true of a stablecoin held on its own: a plain USDT or USDC token does not accrue interest just for being in your wallet. Yet stablecoins are widely held partly because they can be put to work. The yield comes from doing something with the stablecoin, whether that is lending it, supplying it as liquidity, or holding a wrapped version that channels income back to you. The live yields table below shows current rates on tracked platforms; the numbers move constantly, so this section explains where the yield comes from and what it costs in risk rather than promising any particular rate.

Where stablecoin yield comes from

There are a few main sources, and it is worth knowing which one is paying you:

• Lending. On DeFi lending markets such as Aave and Compound, you supply your stablecoins to a pool that borrowers draw from, and the interest borrowers pay flows to suppliers. Rates float with supply and demand: when borrowing demand for dollars is high, supply yields rise; when it cools, they fall. Centralized lenders offer a similar service, but with the added risk that you are trusting a company rather than an audited, on-chain contract.
• Liquidity provision. Decentralized exchanges pay a share of trading fees to users who deposit stablecoins into liquidity pools (for example, a USDC/USDT pool). You earn a cut of every swap routed through the pool. Stablecoin-to-stablecoin pools carry relatively little price-divergence risk compared with volatile pairs, but they are not free of it, and the contracts themselves can be exploited.
• Tokenized Treasury yield. The newest source is the most conventional: tokens backed by short-term US Treasury bills pass the government’s own interest rate through to holders. The yield here is essentially the prevailing T-bill rate minus a fee, which is why it tends to track short-term interest rates rather than crypto market conditions.

A stablecoin vs. a yield-bearing wrapper

This distinction trips up a lot of people. A pure payment stablecoin (USDT, USDC) is designed to sit at exactly one dollar and to pay you nothing for holding it — its job is stability and settlement. A yield-bearing wrapper is a different instrument: it takes a stablecoin (or Treasuries) and wraps it so that the holder receives the income generated underneath. Some wrappers rise gradually in price as yield accrues (so the token is worth a little more over time rather than staying pinned at $1), while others keep a $1 price and increase the number of tokens you hold. Either way, you are no longer holding a simple dollar token — you are holding a claim on an income-producing strategy, which is why these are often regulated as securities or fund interests rather than as plain stablecoins. Do not assume a yield-bearing token is as simple or as redeemable-on-demand as the stablecoin it is built from.

The risks behind the yield

Yield is compensation for risk, and on stablecoins the risks are real even though the price looks stable:

• Smart-contract risk. Lending pools, DEX liquidity, and yield wrappers all run on smart contracts. A bug or exploit can drain a pool, and a stable price offers no protection if the underlying contract is compromised.
• Counterparty and platform risk. With centralized yield products you are trusting a company to remain solvent and to actually hold what it claims. Several high-yield centralized lenders have failed, and depositors lost funds — a stable token does not help if the platform holding it goes under.
• Variable and unsustainable rates. DeFi yields float and can fall quickly. Be especially wary of any product advertising an unusually high, “guaranteed,” or fixed APY on a stablecoin: outsized yields that are not clearly sourced from real lending demand or Treasury income are a classic warning sign, and the highest-profile stablecoin collapse in history was preceded by exactly such a too-good-to-be-true rate.
• De-peg pass-through. If the underlying stablecoin itself loses its peg, the yield is irrelevant — you can lose principal regardless of the rate you were earning.

None of this is financial advice, and no rate shown below is a promise. The sensible frame is that earning yield on a stablecoin means taking on lending, contract, or counterparty risk in exchange for a return, and that the size of the yield is usually a fair signal of how much risk you are taking.

Yields are variable, not guaranteed, and carry smart-contract and counterparty risk.

Stablecoin regulation

For years stablecoins grew in a legal grey zone, governed mostly by money-transmission rules never designed for them. That has changed quickly. Stablecoin regulation is now consolidating across the major economies, with the United States and the European Union setting the two most consequential frameworks and a cluster of Asian and Middle Eastern jurisdictions building their own regimes. The thrust everywhere is broadly the same: require real, high-quality reserves, demand disclosure, and decide who is allowed to issue a dollar (or euro) token. The jurisdiction-by-jurisdiction tracker below summarizes the major frameworks; this section explains what they actually do.

United States — the GENIUS Act

The most important development for the dollar-stablecoin market is the GENIUS Act, the first comprehensive US federal framework for payment stablecoins, which was signed into law in July 2025 after passing both chambers of Congress with bipartisan support. The law (whose full name is the Guiding and Establishing National Innovation for U.S. Stablecoins Act) creates a dedicated federal regime for “payment stablecoins” — dollar tokens used for payments — rather than leaving them under a patchwork of state rules.

According to summaries of the statute from law firms and the text on Congress.gov, the core requirements are strict. Issuers must hold 100% reserves in high-quality liquid assets such as US dollars and short-term US Treasuries, and must make regular disclosures about that backing. Crucially, the Act limits who may issue a payment stablecoin: permitted issuers are generally subsidiaries of insured banks, nonbank entities supervised by the Office of the Comptroller of the Currency, or state-regulated issuers meeting comparable standards — and non-financial public companies are largely barred from issuing unless they clear a high bar. The law also prioritizes stablecoin holders ahead of other creditors if an issuer becomes insolvent, an explicit consumer-protection backstop.

For issuers like Circle (USDC), Tether (USDT) and Paxos (which issues PYUSD), the GENIUS Act sets the terms for legally serving the US market — pushing every serious issuer toward full reserves, disclosure and a licensed structure, and prompting some to launch US-specific, GENIUS-aligned products. For holders, the practical effect is a clearer expectation that a US-compliant stablecoin is genuinely fully backed by safe assets and properly disclosed. The law’s requirements phase in over time: implementing regulations from federal agencies are being written through 2026, and the framework takes full effect on a statutory timetable (the earlier of a fixed deadline in 2027 or shortly after final rules are issued), so the regime is being stood up rather than switched on overnight.

European Union — MiCA

The European Union moved earlier, through its Markets in Crypto-Assets Regulation (MiCA), the EU’s comprehensive crypto framework. MiCA treats stablecoins as one of two regulated token types: e-money tokens (EMTs), which reference a single official currency like the euro or the dollar, and asset-referenced tokens (ARTs), which reference a basket or other assets. Its stablecoin reserve and licensing rules are already in force — the relevant provisions began applying in mid-2024, ahead of the broader rules for crypto service providers that followed at the end of 2024.

MiCA’s effect on the market has been concrete and visible. Under the regime, EU-regulated exchanges (crypto-asset service providers) may not offer stablecoins to the public unless the issuer is authorized in the EU. Circle obtained electronic-money authorization in France in 2024, making USDC compliant and widely available on EU venues. Tether, by contrast, chose not to pursue MiCA authorization for USDT, and as a result major exchanges progressively removed or restricted USDT trading pairs for users in the European Economic Area through late 2024 and into 2025. As the European Securities and Markets Authority (ESMA) clarified, this restriction targets exchange offerings rather than personal holding or transfer — but the upshot is that USDC became the default compliant dollar token on EU platforms while USDT’s on-exchange availability in the bloc narrowed.

It is worth noting how the US and EU approaches differ in emphasis even though both demand real reserves and disclosure. The GENIUS Act is built specifically around payment stablecoins and routes issuance through the banking and federal/state supervisory system; MiCA is a broader crypto regulation that slots stablecoins into its EMT and ART categories and ties their offering to authorized service providers. The most visible practical divergence so far has been availability: a major dollar token (USDT) remained freely issued under the US trajectory while being pulled from regulated EU exchanges under MiCA. For globally used stablecoins, complying with both regimes at once — rather than either one alone — is becoming the real bar.

United Kingdom and Asia

Beyond the two big frameworks, several other jurisdictions have moved from principle to rules:

• United Kingdom. The UK is implementing a regulated regime that brings fiat-backed stablecoins used for payments under the oversight of the Financial Conduct Authority (and, for systemic arrangements, the Bank of England), building on its broader framework for crypto-assets. The direction mirrors the global consensus: authorized issuers, backing requirements and disclosure.
• Hong Kong. Hong Kong has enacted a dedicated stablecoin law establishing a licensing regime for fiat-referenced stablecoin issuers, administered by the Hong Kong Monetary Authority, with reserve, redemption and governance requirements — positioning the city as a regulated hub for the sector.
• Singapore. The Monetary Authority of Singapore has finalized a stablecoin framework for single-currency stablecoins, setting standards for reserve backing, capital, and timely redemption at par so that tokens meeting the bar can be recognized as MAS-regulated stablecoins.
• Japan. Japan was an early mover, having amended its laws to treat stablecoins as a form of electronic payment instrument that may be issued by regulated entities such as banks, trust companies and licensed money-transfer firms — one of the first major economies to give stablecoins a clear legal status.
• United Arab Emirates. The UAE has introduced a regulated payment-token framework, with the Central Bank establishing rules for dirham-backed and approved stablecoins used for payments, alongside the crypto regimes operated in its financial free zones.

What regulation means for you

For an ordinary holder, the wave of stablecoin regulation is, on balance, a move toward more transparency and safety. Full-reserve requirements, mandated disclosures and licensed issuers make it more likely that a regulated stablecoin is genuinely backed by the safe, liquid assets it claims, and frameworks that prioritize holders in an insolvency add a real protection that did not previously exist. The trade-offs are practical: some tokens may become unavailable on regulated exchanges in certain regions (as USDT did on EU venues), compliant issuers may pass on compliance costs, and certain higher-yield or less-transparent arrangements may be curtailed. None of this is investment advice — the takeaway is simply that the rules now increasingly distinguish a fully regulated, fully reserved stablecoin from one that is not, and that distinction is worth checking for any token you hold.

Regulatory summary for general information only; not legal advice. Frameworks evolve — verify current status with primary sources.

Is X a stablecoin?

A lot of confusion comes from lumping every major cryptocurrency together. The test is simple: a stablecoin is engineered to hold a steady value (almost always one US dollar) through reserves or another peg mechanism. A coin that is free to rise and fall with the market is not a stablecoin, no matter how popular it is. Here are the most common questions.

Is Bitcoin a stablecoin?

No. Bitcoin (BTC) is the opposite of a stablecoin. It has no peg and no reserves backing a fixed price; its value is set entirely by the market and can move sharply in either direction within a single day. Bitcoin is a volatile asset that people hold for potential price appreciation or as “digital gold,” not a token designed to stay at a dollar. The confusion usually comes from Bitcoin being the most famous cryptocurrency, so newcomers assume all crypto behaves like cash — but stability is exactly what Bitcoin does not offer.

Is Ethereum a stablecoin?

No. Ethereum’s native coin, ether (ETH), is also a volatile asset with no peg. Its price floats freely with the market. Ethereum is frequently confused with stablecoins because so many stablecoins (USDT, USDC, DAI and others) are issued on the Ethereum blockchain — but the network being a home for stablecoins does not make its own coin one. ETH itself is held for its utility and potential appreciation, and it is not engineered to hold any fixed value.

Is XRP a stablecoin?

No — and this one has an important twist. XRP, the cryptocurrency associated with the XRP Ledger, is a volatile asset with no dollar peg; its price moves with the market like Bitcoin or ether. However, Ripple (the company linked to XRP) launched a separate token called RLUSD (Ripple USD), which is a stablecoin: it is a dollar-pegged, fiat-backed token, distinct from XRP, available on the XRP Ledger and on Ethereum. So the accurate statement is: XRP is not a stablecoin, but RLUSD is. They are two different assets, and RLUSD does not replace or compete with XRP — it simply gives the ecosystem a regulated dollar token alongside the volatile XRP.

What about USDC, USDT and DAI?

These are stablecoins. USDT (Tether) and USDC (USD Coin) are fiat-collateralized dollar stablecoins — the two largest in the market — and DAI is a crypto-collateralized dollar stablecoin. All three are designed to hold a value of one US dollar, which is precisely what makes them stablecoins and what separates them from BTC, ETH and XRP. If a token’s entire purpose is to stay at a dollar and it is backed by reserves or over-collateralization to do so, it qualifies; if its price is meant to move freely with the market, it does not.

Use cases

Stablecoins matter because of what people actually do with them. A dollar that settles on a blockchain in minutes, moves globally without a bank, and plugs into programmable contracts turns out to be useful across a wide range of real activities — from crypto trading to cross-border payroll. Here are the main use cases.

Trading and settlement

This is the original and still the largest use. On crypto exchanges, most trading happens against stablecoin pairs rather than against fiat — you buy and sell Bitcoin, ether and thousands of other assets priced in USDT or USDC. Stablecoins are the de facto cash leg of crypto markets: they let traders move in and out of positions instantly, hold dollar value between trades without leaving the ecosystem, and settle transactions between desks and exchanges far faster than a bank wire would allow. The depth and liquidity of stablecoin order books is a big part of why they dominate.

Cross-border payments and remittances

Sending money across borders through traditional channels can be slow and expensive, with fees and multi-day settlement. A stablecoin can be sent to anyone with a wallet, anywhere, in seconds to minutes, for a network fee that is often a small fraction of a traditional transfer — and it arrives as dollars rather than as a local currency that has to be converted. That makes stablecoins attractive for remittances, for freelancers and contractors paid internationally, and for businesses settling with overseas suppliers. In economies with high inflation or limited access to US dollars, stablecoins also serve as a way for ordinary people and businesses to hold and transact in something dollar-stable.

DeFi collateral and liquidity

Stablecoins are the backbone of decentralized finance. They are the most common asset deposited into lending protocols (both to earn yield and to borrow against), the dollar leg in countless liquidity pools on decentralized exchanges, and the unit of account that DeFi uses to price loans and collateral. Because a stablecoin behaves like a dollar, it lets these protocols offer recognizable financial services — lending, borrowing, trading, hedging — without the price of the unit itself swinging around. Much of the total value locked in DeFi is denominated in, or directly composed of, stablecoins.

Merchant and everyday payments

Stablecoins are increasingly used to pay for goods and services. Because settlement is fast and final and fees can be low, merchants and payment processors have begun accepting stablecoins, and they are used for online purchases, payroll, and business-to-business payments. For a merchant, accepting a dollar stablecoin avoids the price volatility that made earlier crypto payments impractical — the money received is dollar-stable from the moment it lands. Payment networks and fintech companies have been building stablecoin rails into their products to make this smoother for ordinary users.

Tokenized money and the move into traditional finance

The newest frontier is stablecoins meeting traditional finance (TradFi). Increasingly, dollar-stable tokens and closely related tokenized-Treasury instruments are being used by institutions as on-chain cash and settlement assets — a way to hold dollars or short-term government debt in tokenized form that can move and settle around the clock. With clearer regulation now in place in major jurisdictions, banks, asset managers and payment companies are exploring or issuing regulated stablecoins and tokenized money-market products. The line between “crypto stablecoin” and “tokenized dollar in the financial system” is blurring, which is one reason the category has grown into the hundreds of billions of dollars. This is a factual trend, not a prediction — how far it goes will depend on regulation, adoption and infrastructure.

FAQ

Short, direct answers to the questions people most often ask about stablecoins. None of this is financial advice.

Are stablecoins safe?

It depends on the stablecoin. A fully reserved, well-run stablecoin has held its dollar value reliably, including through major market stress, but stablecoins are not bank deposits and are generally not government-insured. Fiat-backed tokens carry banking and reserve risk. Crypto-backed tokens carry collateral and smart-contract risk. Purely algorithmic tokens have failed completely in the past, TerraUSD being the example the market still cites.

Which stablecoin is the biggest?

Tether (USDT) is the largest stablecoin by market capitalization, with USD Coin (USDC) the second largest. Rankings can shift over time, so the live table on this page shows the current order and sizes as the market updates.

Do stablecoins pay interest?

A plain stablecoin does not pay interest just for being held in your wallet. You can earn yield by lending it on DeFi protocols, supplying it to liquidity pools, or holding a yield-bearing token backed by Treasuries — but each of those involves additional risk (smart-contract, counterparty, or variable rates). The yields table above shows current rates with caveats.

Are stablecoins legal and regulated?

Yes, and regulation is expanding. The United States enacted a federal stablecoin law (the GENIUS Act) in 2025, and the European Union’s MiCA framework already regulates stablecoins across the EU, with other jurisdictions following. These rules set requirements around reserves, disclosures, and who may issue stablecoins. Legality and the exact rules vary by country, so it is worth checking your local regulations.

Can a stablecoin lose value or depeg?

Yes. A stablecoin can trade below (or above) its target during stress — this is called a depeg. Some depegs are brief and fully recover: USD Coin dropped to about $0.88 in March 2023 during the Silicon Valley Bank failure and regained its dollar peg within days. Others are permanent: the algorithmic stablecoin TerraUSD (UST) lost its peg in May 2022 and collapsed toward zero. The peg is a design goal, not a guarantee.

What backs USDT and USDC?

Both are fiat-collateralized, meaning each token is backed by reserves of cash and cash-equivalent assets — primarily short-term US Treasury bills and bank deposits — held by the issuer (Tether for USDT, Circle for USDC). Reputable issuers publish regular reserve attestations or reports so the backing can be independently reviewed.

What is the difference between USDT and USDC?

Both are dollar-pegged, fiat-backed stablecoins, and in everyday use they behave very similarly. The differences are in their issuers, reserve composition and disclosure practices, and regulatory posture — USDC’s issuer has emphasized US regulatory engagement and detailed reserve reporting, while USDT is the larger and most widely traded token globally. Neither is “the stablecoin” in an official sense; they are competing dollar tokens.

Are stablecoins a good place to store value?

Stablecoins let you hold dollar value on-chain without the volatility of other cryptocurrencies, which some people use for moving money, trading, or accessing dollars in places where that is hard. But “store of value” deserves caution: stablecoins are not insured like a bank account, they carry the risks described above, and earning yield on them adds further risk. Whether a stablecoin suits your needs depends on your situation, and this page is educational, not financial advice.

Is Bitcoin or XRP a stablecoin?

No. Bitcoin (BTC) and XRP are volatile assets with no dollar peg, so neither is a stablecoin. Note that Ripple separately issues RLUSD, which is a dollar-pegged stablecoin distinct from XRP. Ethereum’s ether (ETH) is likewise not a stablecoin, even though many stablecoins are issued on the Ethereum network.

Latest stablecoin news

Stablecoins move fast — reserve disclosures, new regulation, depeg scares, issuer launches and shifting market share can all land in a single week. The STnews newsroom tracks these developments daily, and our latest stablecoin coverage appears below, refreshed automatically as new articles are published. Use it to stay current on the issuers and tokens covered throughout this guide — from USDT and USDC reserve reports to the rollout of the GENIUS Act and MiCA. For the full archive of ongoing reporting, analysis and explainers, head to our dedicated stablecoin news section, where every story is written and reviewed by the STnews editorial team.

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