Quick answer: Stablecoins are crypto tokens designed to keep a steady value, usually $1. Most are backed by cash and short-term government debt held by a company, such as USDT and USDC. Others rely on crypto collateral or trading strategies. They are the main way money moves around crypto, but each one carries issuer, reserve, depeg and regulatory risks.
This hub collects everything CryptoVank has published about stablecoins in one place. Start here for the big picture, then follow the links to our in-depth explainers and the latest news. It is written for readers worldwide, so it covers the main rules in the US and the EU without assuming where you live.
What are stablecoins?
A stablecoin is a token on a blockchain that tracks the value of something stable, most often the US dollar. Ordinary cryptocurrencies such as bitcoin can swing by 10% in a day. A dollar stablecoin aims to be worth $1 today, tomorrow and next year. As a result, traders, apps and payment companies can use it like digital cash while staying on crypto rails that run 24/7.
For the mechanics of how issuers mint, redeem and back their tokens, read our explainer Stablecoins Explained: How USDT and USDC Hold $1, and What Can Go Wrong.
The main types of stablecoins
- Fiat-backed: a company holds cash and short-term government bonds and issues one token per dollar held. Examples include USDT (Tether), USDC (Circle), PYUSD (PayPal, issued by Paxos) and Ripple’s RLUSD. They are simple and liquid, but you rely on the issuer and its banks.
- Crypto-collateralized: smart contracts lock more crypto than the stablecoins they issue, as with DAI and USDS from Sky (formerly MakerDAO). This design is more transparent on-chain. However, sharp crypto crashes can test the collateral.
- Synthetic or strategy-backed: tokens such as Ethena’s USDe hold crypto and offsetting short futures positions to stay near $1. They can pay a yield, but they depend on derivatives markets and funding rates.
- Commodity-backed: tokens such as PAXG and XAUT track the price of gold rather than a currency.
- Algorithmic: these tried to hold $1 with incentives alone instead of full reserves. TerraUSD (UST) collapsed in May 2022, which is why this design is now widely treated as high risk.
How stablecoins hold their peg
Most dollar stablecoins stay close to $1 through redemption and arbitrage. When a token trades below $1, approved firms can buy it cheaply and redeem it with the issuer for a full dollar. That buying pushes the price back up. When it trades above $1, they mint new tokens and sell them. This only works if the reserves are really there and redemptions keep flowing.
The system can break. In March 2023, USDC briefly fell well below $1 after Circle disclosed that part of its reserves sat at the failed Silicon Valley Bank. It recovered once the deposits were secured. Our DeFi risks explainer covers what happens when pegs break inside lending and trading protocols.
What people use stablecoins for
- Trading: most crypto pairs are quoted against USDT or USDC, so traders park funds in stablecoins between trades.
- Payments and remittances: sending dollars across borders in minutes, at any hour.
- Spending with a card: many crypto cards let you spend stablecoin balances at regular merchants. Compare them in our crypto cards ranking.
- DeFi: lending, borrowing and providing liquidity, which can earn yield but adds smart-contract risk.
- Moving between blockchains: issuers increasingly support native transfers across networks. For example, Circle’s CCTP V2 brought native USDC to Sui.
Stablecoin risks to understand
- Issuer and reserve risk: is the backing real, liquid and audited or attested?
- Depeg risk: even large stablecoins can trade below $1 during stress.
- Freezes and blacklists: fiat-backed issuers can freeze tokens at specific addresses, for example under law-enforcement requests.
- Smart-contract and bridge risk when you use stablecoins in DeFi or move them across chains.
- Scams: fake “stablecoin yield” schemes are common. Learn the warning signs in How to Spot Crypto Scams.
Stablecoin regulation
Rules are moving fast. In the EU, the stablecoin rules of the Markets in Crypto-Assets regulation (MiCA) have applied since June 2024. They require issuers to be authorized and to hold reserves. In the US, the GENIUS Act, signed in July 2025, created a federal framework for payment stablecoins. Tax treatment varies by country. For instance, France has proposed changes to how stablecoin swaps are taxed, as covered in France’s crypto tax plan. See also our crypto taxes basics guide and the latest regulation news.
How to hold stablecoins safely
You can keep stablecoins on an exchange, but then you rely on that platform. Holding them in your own wallet removes that counterparty, although the security becomes your job. Follow our self-custody wallet setup guide. If you use a hardware wallet, also learn how to check that it is genuine. Always double-check the token contract and network before sending, because tokens sent to the wrong chain can be hard or impossible to recover.
Stablecoins FAQ
Are stablecoins safe?
They are safer from price swings than other crypto, but they are not risk-free. You depend on the issuer’s reserves, its banks, regulation and the blockchain you use. They are not bank deposits and are generally not covered by deposit insurance.
What is the difference between USDT and USDC?
Both are fiat-backed dollar stablecoins. Tether issues USDT and Circle issues USDC. They differ in issuer, reserve reporting, regulatory status and which exchanges and blockchains support them. For a full side-by-side comparison, read USDT vs USDC: Which Stablecoin Is Safer?
Can a stablecoin lose its peg?
Yes. Stablecoins can trade below $1 during market stress or when there are doubts about reserves. USDC did so briefly in March 2023, and algorithmic TerraUSD collapsed permanently in 2022.
Do stablecoins pay interest?
Holding a fiat-backed stablecoin usually pays nothing by itself; the issuer keeps the reserve income. Yield products built on top of stablecoins carry extra risks from platforms, smart contracts or strategies.
Are stablecoins taxed?
It depends on your country. In many places, swapping crypto for a stablecoin is a taxable disposal. Check local rules or ask a tax professional.
This hub is for information only and is not financial advice. We update it as our coverage grows. Spotted an error? See our corrections policy.