Stablecoins are the least exciting part of crypto, and arguably the most important. They’re the dollars of the blockchain world: used to trade, lend, pay and move money across borders 24/7. Here’s how they work and what to watch out for.
What is a stablecoin?
A stablecoin is a crypto token designed to keep a steady value, usually $1. Unlike bitcoin, its price isn’t supposed to move. You get the speed and programmability of crypto without the volatility.
The two largest, per CoinGecko at 15:25 UTC on Oct. 9, 2026:
| Stablecoin | Issuer | Market cap | Price |
|---|---|---|---|
| USDT (Tether) | Tether | ~$184.1B | $0.9992 |
| USDC | Circle | ~$73.0B | $0.9996 |
Together they make up most of the stablecoin market and around 9% of the total crypto market value of about $2.80 trillion.
How the $1 peg works
Most large stablecoins are fiat-backed:
- You give the issuer $1 (directly, or through an exchange).
- The issuer mints 1 token and holds $1 in reserves, mostly cash, bank deposits and short-term U.S. Treasury bills.
- When someone redeems a token, the issuer burns it and pays back $1.
Because large holders can always redeem for $1, traders buy when the price dips below $1 and sell when it rises above $1. That arbitrage keeps the market price close to the peg. Both issuers publish reserve reports: see >Circle’s transparency page and >Tether’s transparency page.
Types of stablecoins
| Type | Backing | Example | Main risk |
|---|---|---|---|
| Fiat-backed | Cash and Treasuries | USDT, USDC | Reserve quality, issuer, banking |
| Crypto-collateralized | Over-collateralized crypto | DAI/USDS | Collateral crash, liquidations |
| Synthetic / delta-neutral | Crypto plus hedges | Ethena’s USDe | Funding rates, exchange risk |
| Algorithmic | Code and a sister token | TerraUSD (failed 2022) | Death spiral |
The 2022 collapse of TerraUSD is the cautionary tale. An “algorithmic” design without real reserves lost its peg and wiped out tens of billions of dollars of value.
What stablecoins are used for
- Trading: most crypto trades are priced against USDT or USDC.
- DeFi: lending, borrowing and liquidity pools (DeFi risks). Ledger’s new loans, for example, pay out USDC or USDT (our report).
- Payments and cards: many crypto cards spend stablecoins, which keeps taxable gains minimal.
- Cross-border transfers: sending dollars globally in minutes.
- Savings in high-inflation economies: a way to hold dollars where bank access is limited.
How stablecoins move across chains
USDC exists on many blockchains. Circle’s Cross-Chain Transfer Protocol (CCTP) moves it by burning tokens on one chain and minting them on another, which avoids risky bridges. Sui joined CCTP V2 this week (our report).
Regulation
- United States: the GENIUS Act, signed in July 2025, created a federal framework for payment stablecoins, including 1:1 reserves of high-quality liquid assets, regular disclosures and licensing for issuers.
- European Union: MiCA‘s stablecoin rules have applied since mid-2024, requiring authorization and reserve standards for issuers serving EU users.
- Elsewhere: countries are setting their own rules. Russia’s draft framework, for example, names USDT as an admissible foreign instrument (our report), while Morocco’s draft bill would put stablecoins under the central bank (our guide).
The risks
- Reserve risk: are the reserves really there, and are they liquid?
- Issuer freezes: USDT and USDC issuers can freeze addresses, for example after a hack or at law enforcement’s request.
- Depegs: even well-backed coins can slip below $1 briefly in a crisis. USDC dipped in March 2023 when a reserve bank failed.
- Platform risk: a stablecoin held on a failing exchange is only as safe as the exchange.
- No deposit insurance: stablecoins are not bank deposits.
CryptoVank’s take
Stablecoins are the most practical crypto product for most people, but “stable” describes the price, not the risk. Prefer large, transparent, regulated issuers, keep big balances in your own wallet rather than on an exchange, and treat yield offered on stablecoins with healthy skepticism. If it’s high, someone is taking risk with your money.
FAQ
Are stablecoins safe?
Large, reserve-backed stablecoins have held their pegs well, but they carry issuer, reserve and freeze risks and are not insured deposits.
What’s the difference between USDT and USDC?
Both are dollar-backed. USDT (Tether) is larger. USDC (Circle) emphasizes U.S. regulatory compliance and monthly reserve attestations.
Can a stablecoin lose its peg?
Yes. Algorithmic designs have failed completely, and even reserve-backed coins can dip briefly in a crisis.
Do I pay tax on stablecoins?
Spending or selling them can be a taxable event in many countries, but gains are usually tiny because the price barely moves.
Sources
- >CoinGecko: USDT and >USDC market data, Oct. 9, 2026, 15:25 UTC
- >Circle: Transparency and reserves
- >Tether: Transparency
- >Congress.gov: GENIUS Act (S.1582)
This article is for information only and is not financial advice.
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