Glossary
Stablecoin
A cryptocurrency designed to hold a steady value, usually one US dollar, backed by cash and Treasury reserves or, in riskier designs, by algorithms.
On this page
A stablecoin is a crypto token built to keep a fixed value, most often $1.00. It moves on a blockchain like any other token, but without the price swings of bitcoin or ether. That makes stablecoins the main "cash" of crypto markets: traders park money in them between trades, and they are increasingly used for payments and cross-border transfers.
How the peg is held
- Fiat-backed. The issuer holds reserves, mainly cash and short-term Treasury bills, of at least one dollar for every token, and lets approved customers redeem tokens for dollars. Tether's USDT and Circle's USDC are the largest.
- Crypto-collateralized. Tokens are backed by more than $1 of other crypto locked in smart contracts, to absorb price drops.
- Algorithmic. Supply is expanded or shrunk by code with little or no reserve. TerraUSD, the best-known example, lost its peg and collapsed in May 2022.
Risks to understand
A peg is a promise, not a guarantee. In March 2023, USDC briefly fell to around 87 cents after Circle disclosed that part of its reserves sat at the failed Silicon Valley Bank. In the US, the GENIUS Act of July 2025 created a federal framework for payment stablecoins, including one-to-one reserve requirements; regulators were still writing the detailed rules in 2026. Stablecoins are not bank deposits and are not covered by FDIC insurance or SIPC protection, and the issuer, not the holder, earns the interest on the reserves.