Stablecoins
Last reviewed November 1, 2026
A stablecoin is meant to be worth the same amount every day, usually one US dollar. It is the bridge between ordinary money and crypto.
Stablecoins are the most-used part of the crypto market. Exchanges use them in place of dollars, DeFi uses them as the base for lending, and in countries with high inflation people hold them as savings.
Whether a stablecoin keeps its peg depends on what backs it and whether you can trust the issuer.
How reserves work
The two largest, Tether's USDT and Circle's USDC, are backed by cash and short-dated US Treasury bills. Each token issued should match a dollar held in reserve. There are also crypto-collateralised stablecoins such as DAI, and algorithmic designs.
When the peg breaks
In May 2022 the algorithmic stablecoin TerraUSD (UST) collapsed. It had no real reserves, only a swap mechanism with the LUNA token, and within days both were close to worthless. Unbacked designs have been treated as very high risk ever since.
The rules now
In the US, the GENIUS Act signed in July 2025 created a federal framework for payment stablecoins, requiring one-to-one reserves and licensed issuers. In the EU, MiCA has applied to stablecoin issuers since 30 June 2024. The UK is building its own regime for sterling and other stablecoins under the FCA.
Pick the right network
The same USDT exists on several blockchains, such as Ethereum and Tron. They are separate rails, and sending on the wrong one can mean losing the funds. Check before every transfer.