Last updated: 2 October 2026
A stablecoin is a cryptocurrency designed to hold a steady price by tracking another asset, usually the US dollar. Most stablecoins are backed by reserves of cash and short-term government debt, and the issuer swaps tokens for dollars one for one. People use them to move dollars on a blockchain without the price swings of Bitcoin or Ether.
The market is bigger than most people expect. Stablecoins in circulation were worth about $306 billion on 2 October 2026, according to DefiLlama's stablecoin data, and two coins, USDT and USDC, made up more than four fifths of that.
What is a stablecoin?
The IMF's December 2025 paper Understanding Stablecoins defines them as "crypto assets that aim to maintain a stable value relative to a specified asset or a pool or basket of assets." In practice that asset is usually a national currency, and most often the US dollar.
A stablecoin has three moving parts. There's the peg, the price it aims for, such as $1. There's the issuer, which is a private company like Circle or Tether, or a protocol run by code. And there's the blockchain the token lives on, such as Ethereum, Solana or Tron.
Are stablecoins cryptocurrencies? Technically, yes. They're tokens on a public blockchain, you hold them in a crypto wallet, and they move like any other crypto. The difference is the peg.
Do stablecoins go up in value? No, and that's the point. A dollar stablecoin is built to stay at $1, so there's no price upside to wait for.
They also aren't central bank digital currencies. A central bank issues a CBDC, while stablecoin issuers are private entities.
How do stablecoins keep their value?
A fiat-backed stablecoin stays near $1 because the issuer will swap it for exactly $1, and traders profit from closing any gap between that promise and the market price.
Reserves and redemption
When an approved customer sends dollars to the issuer, the issuer creates (mints) the same number of new tokens. When a customer hands tokens back, the issuer pays out dollars and destroys (burns) them. The dollars sit in reserve in between.
Circle, for example, says the majority of the USDC reserve sits in an SEC-registered government money market fund, with the rest held as cash at large banks, according to its USDC transparency page (data as of 24 September 2026). Direct minting and redemption are normally open to verified customers, mostly businesses. Everyone else buys and sells on the market.
Why the price stays near $1
The market price drifts. It might sit at $0.998 on one exchange and $1.002 on another for a few minutes. Arbitrage pulls it back. Here's a worked example with made-up round numbers:
- A stablecoin slips to $0.98 on an exchange.
- A trader buys 10,000 tokens there for $9,800.
- The trader redeems them with the issuer for $10,000 and keeps the $200 difference.
- That buying pushes the market price up, and redemption shrinks the supply, until the gap closes.
The same logic runs in reverse. If the price rises to $1.02, traders mint new tokens at $1 and sell them, which adds supply and brings the price down.
This only works while traders believe redemption will be honored. That belief is the real peg.
How issuers make money
Reserves earn interest. Short-term Treasuries, repo and money market funds all pay a yield, and holders of a stablecoin receive none of it. In the US, the GENIUS Act prohibits permitted payment stablecoin issuers from paying holders interest or yield. So the issuer keeps the interest earned on billions of dollars of reserves, and that is the core of the business.
Types of stablecoins
Stablecoins differ by what stands behind them. The IMF paper describes reserves that "may comprise financial assets, commodities, or other crypto assets," plus algorithmic designs that try to hold the peg by trading their own supply. That gives four types.
Fiat-backed stablecoins
These hold a currency and short-dated government debt, and they dominate the market. USDT from Tether and USDC from Circle are the two largest. You can buy either coin with a card or bank transfer through an on-ramp, for example USDC or USDT on Ramp Network.
Not every fiat-backed coin tracks the dollar. EURC, also from Circle, tracks the euro, and Circle says it's redeemable one for one for euros.
Crypto-backed stablecoins
These are minted against other crypto deposited in a smart contract. DefiLlama describes DAI as minted "by depositing accepted collateral assets into Maker Vaults," with the DAI burned when the loan is repaid. Because crypto prices move fast, the systems keep a cushion: DefiLlama describes USDS as "backed by surplus collateral," meaning more crypto is locked up than the stablecoins issued against it.
Commodity-backed stablecoins
These track a commodity rather than a currency, so their price moves. Paxos says each PAX Gold token is backed by one fine troy ounce of gold stored in London vaults. Paxos also says PAXG is currently unavailable in the EU.
Algorithmic stablecoins
These try to hold a peg through code and incentives, with no dedicated reserves behind them. The IMF notes that algorithmic stablecoins "typically do not have dedicated reserve assets." The best-known example, TerraUSD, is covered in the risks section below, because it's also the clearest lesson in how a peg breaks.
The largest stablecoins today
Five coins hold most of the market. USDT alone accounted for about 60% of all stablecoins by value on 2 October 2026, per DefiLlama.
USDe works differently from the rest. DefiLlama files it under crypto-backed, but it holds its value through hedged trading positions, "delta-neutral hedging across centralized and decentralized venues," rather than a pool of dollars.
Below the top five sit newer dollar coins, including World Liberty Financial USD (USD1), Global Dollar (USDG) and PayPal USD (PYUSD), each worth between about $2.9 billion and $4.4 billion on the same date, per DefiLlama.
For most people, the real choice is between the top two. Our comparison of how USDT and USDC differ covers reserves, regulation and networks side by side.
What is not a stablecoin: XRP, Bitcoin, Ethereum and Solana
Plenty of well-known coins get mistaken for stablecoins. None of these are.
XRP is not a stablecoin: it's the native token of the XRP Ledger, and its price moves with the market. Ripple does issue a separate dollar stablecoin, Ripple USD (RLUSD), which DefiLlama lists at about $2.5 billion in circulation on 2 October 2026.
Bitcoin is not a stablecoin: it has a fixed maximum supply and no peg, so its price floats freely.
Ethereum is not a stablecoin: ETH pays for activity on the Ethereum network, and its price is set by trading. Many stablecoins run on Ethereum, which is where the confusion starts.
Solana is not a stablecoin either: SOL is the native token of the Solana blockchain, priced by the market, though USDC and USDT both circulate on Solana.
What are stablecoins used for?
People use stablecoins when they want dollars that move like crypto. The common uses are practical.
- Holding a dollar balance between trades. Traders park funds in a stablecoin instead of cashing out to a bank and back again.
- Sending money abroad. A stablecoin transfer settles on the blockchain in minutes, any day of the week, and the recipient can hold dollars instead of a local currency.
- Getting paid in dollars. Freelancers and remote workers paid by overseas clients receive USDC or USDT and convert when they need to.
- Moving between fiat and crypto. Stablecoins are a common entry and exit point, because many crypto trading pairs are priced in them.
Businesses use them too, mainly to settle payments with partners across borders without waiting for bank cut-off times.
Here's what a simple send looks like in a self-custodial wallet app: choose the recipient by username instead of a long address, enter the amount, and approve with a passkey. Some apps cover the network fee for transfers between their own users. You can even send USDC to someone who doesn't have a wallet yet by sharing a payment link they claim later.
Where stablecoins live: networks and fees
One stablecoin can exist on many blockchains at once. USDC on Ethereum and USDC on Solana are the same coin from the same issuer, issued separately on each network.
The network decides what a transfer costs and how fast it arrives, not the coin. Sending USDT on Tron and sending USDT on Ethereum can cost very different amounts on the same day. Our USDT and USDC guide includes dated fee examples by network.
The rule that matters most: send and receive on the same network. Send USDC over one network to an exchange deposit address that only watches another, and the transaction still confirms on the blockchain, but the exchange never credits it. Some exchanges can recover a wrong-network deposit by hand. Others can't.
The mistake is easy to make because addresses can look identical. An address on Ethereum and one on Base use the same format, so nothing on screen warns you that you picked the wrong network.
So before buying or sending, check which network the receiving wallet or exchange supports, and pick that one. When in doubt, send a small test amount first.
Are stablecoins safe? Risks to know
Stablecoins are not risk-free. A fiat-backed coin is only as good as its issuer's reserves and its willingness to redeem, and pegs have broken before. Reserve reports, regulation and the issuer's track record lower the risk. None of them remove it.
Reserve and issuer risk
You hold a claim on the issuer, not the dollars themselves. Issuers publish reports on their reserves, but an attestation confirms what the issuer held on a given date. It is not a full audit of how the company is run. Reserves held at banks also carry bank risk, as USDC showed.
Depegs
Two cases show two different ways a peg breaks.
TerraUSD, May 2022. UST was an algorithmic stablecoin. According to the SEC's February 2023 complaint, it "supposedly maintained its peg to the U.S. dollar by being interchangeable for" its sister token LUNA. In May 2022, the SEC says, "UST depegged from the U.S. dollar, and the price of it and its sister tokens plummeted to close to zero." The IMF puts the damage at "tens of billions of dollars in market value."
USDC, March 2023. USDC had $3.3 billion of its reserves, about 8%, at Silicon Valley Bank when the bank failed. The token traded below $1 until US authorities said all depositors would be made whole, according to Circle's statement at the time. A fully reserved coin still wobbled, because part of its reserve was briefly out of reach.
Freezes and blacklists
Centralized issuers can freeze tokens at specific addresses. Tether, for example, has supported freezes of more than $344 million in USDT in coordination with US authorities. Holding the tokens in your own wallet doesn't change that: the freeze happens in the token's contract.
Ramp Network's stablecoin risk summary lists the risks that apply to the stablecoins it offers.
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Stablecoin regulation: the GENIUS Act and MiCA
The US and the EU now both have dedicated stablecoin laws, and each one sets its rules for the companies issuing the coins rather than for the people holding them.
In the US, the GENIUS Act was enacted on 18 July 2025. Under the Act, as summarized in Treasury's implementation notice, a permitted issuer must publish the composition of its reserves every month and may not pay holders any interest or yield. Treasury proposed detailed rules in August 2026, and its announcement puts the start of issuer licensing on 18 January 2027. From 18 July 2028, platforms serving US customers can generally only offer stablecoins from permitted issuers.
In the EU, MiCA splits stablecoins into two groups. An e-money token tracks a single official currency, like USDC or EURC. An asset-referenced token tracks something else, or a basket that can include several currencies. E-money tokens must come from a bank or an authorized e-money institution, and holders can redeem them at any time at face value.
For an ordinary user, the effect is concrete. Issuers in both regions face reserve and disclosure rules, and which coins you can buy on a regulated platform depends on whether their issuer is authorized where you live.
How to get, send and cash out stablecoins
An on-ramp turns your local currency into stablecoins delivered to your wallet. An off-ramp does the reverse and pays stablecoins back out to your bank account or card.
- Pick the coin and the network. Check which network your wallet or the person you're paying uses.
- Buy with a card, Apple Pay, Google Pay or a bank transfer. You can start with buying USDC with a card or bank transfer, or buying USDT. The total cost, including network fees, is shown before you confirm.
- Decide where to hold it. An exchange account keeps it for you. A self-custodial wallet puts the keys in your hands. Our guide to custodial vs non-custodial wallets explains the trade-off.
- Send it. Copy the receiving address, confirm the network matches, and send a small test amount before the full sum.
- Cash out. When you need local currency again, sell through an off-ramp, for example by cashing USDC out to a bank account or card.
Payment and payout methods depend on your country, and availability is shown at checkout.
Frequently asked questions
Is XRP a stablecoin?
No. XRP is the native token of the XRP Ledger, and its price rises and falls with the market because it isn't pegged to any asset. Ripple does issue a separate dollar stablecoin called Ripple USD (RLUSD). XRP and RLUSD are different tokens, so check which one you're buying before you confirm a purchase.
Are stablecoins cryptocurrencies?
Yes, in the technical sense. Stablecoins are tokens on a public blockchain, held in crypto wallets and sent like any other crypto. What sets them apart is the peg to a currency or asset. Regulators increasingly treat them as their own category: the EU's MiCA rules, for example, classify dollar and euro stablecoins as e-money tokens with their own issuer requirements.
Do stablecoins go up in value?
No, they're designed not to. A dollar stablecoin aims to stay at $1, so there's no price gain to expect from holding one. Small moves around $1, such as $0.998 or $1.002, do happen and are usually closed by redemption and arbitrage. A large move away from $1 is a depeg, which is a risk, not an opportunity.
Are stablecoins a good investment?
Stablecoins are built to hold their value, not to grow it, so they don't work like an investment in the usual sense. Holding them still carries risks: the issuer's reserves and solvency, the chance of a depeg, freezes by the issuer, and changing regulation. Weigh those against what you need the stablecoin for. This is not financial advice.
Why would anyone use a stablecoin?
To move or hold dollars on a blockchain without price swings. Traders often park funds in stablecoins between trades rather than waiting on a bank withdrawal. People sending money abroad use them because transfers settle in minutes, any day. Freelancers paid by overseas clients receive them as payment. And businesses use them to settle with partners across borders without waiting on bank cut-off times.
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