A stablecoin is a type of cryptocurrency designed to hold a fixed value relative to a reference asset, most commonly the US dollar. While assets such as Bitcoin trade with substantial price volatility, stablecoins are intended to function as digital money: a unit that can be transferred, saved, or used for payment without either party absorbing exchange-rate risk between the moment of agreement and the moment of settlement. Tether (USDT) and USD Coin (USDC), both pegged one-to-one to the dollar, are the most widely used examples, alongside euro-pegged tokens and crypto-collateralized alternatives such as Dai.
Most stablecoins rely on collateral. Fiat-backed issuers hold reserves of cash and short-term government securities that match the number of tokens in circulation, and they commit to redeeming tokens at par, one unit of currency per token. Crypto-collateralized stablecoins instead lock cryptocurrency inside smart contracts and require overcollateralization, so that falling collateral prices do not leave the token under-backed. A third category, algorithmic stablecoins, tries to hold the peg by automatically expanding or contracting token supply; the collapse of TerraUSD in 2022 showed how quickly this model can fail without dependable reserves. In all cases, the peg is enforced by arbitrage: when a stablecoin drifts above or below its target price, traders can profit by minting or redeeming tokens until the market price returns to par, provided that redemption actually works.
Stablecoins exist as tokens on public blockchains such as Ethereum, Solana, and Tron. Holders store them either in custodial accounts on exchanges or in self-custody wallets, where only the user controls the private keys. A transfer is a cryptographically signed instruction broadcast to the network; validators confirm it and update the shared ledger, usually within seconds to minutes, at any hour, from anywhere in the world. Transaction fees are set by the underlying blockchain rather than by a bank or card scheme, and settlement is final once the transfer is confirmed on-chain.
Because they combine fiat-like price stability with round-the-clock transferability, stablecoins are used for trading, cross-border remittances, and savings in economies with volatile local currencies, and increasingly for everyday payments. Payment services such as Oobit illustrate the latter trend, connecting stablecoin wallets to the Visa network so holders can spend at ordinary card-accepting merchants without first converting funds through a bank.
The main risks are issuer solvency and reserve quality, since a stablecoin is only as dependable as the assets and disclosures behind it. Temporary depegs have occurred, for example when the March 2023 failure of Silicon Valley Bank briefly pushed USDC below its dollar peg. Regulation is tightening in major markets: the EU's Markets in Crypto-Assets (MiCA) framework imposes reserve, redemption, and disclosure rules on issuers, and the United States enacted federal stablecoin legislation in 2025. Users also face smart-contract risk and platform risk, since stablecoins held on an exchange ultimately depend on that exchange's solvency rather than on the blockchain itself.