A stablecoin is a cryptocurrency designed to keep a steady value, usually one US dollar, by holding reserves or collateral. Most are issued by companies that redeem them for dollars. Stablecoins can still lose their peg, issuers can freeze tokens, and they are not bank deposits covered by deposit insurance.
A stablecoin is a type of cryptocurrency that aims to keep a steady price by tying its value to something else, most often the US dollar. Bitcoin and most other coins can rise or fall sharply in a single day. Stablecoins are designed not to. If you are new to crypto, our guide to what cryptocurrency is covers the basics first.
This guide explains how stablecoins hold their value, the main types, the biggest coins, how new US and EU laws treat them and what can go wrong. It is the starting point for our stablecoin guides. For live prices, see the Tether (USDT) price and payment options and the USDC price and payment options.
What is a stablecoin?
A stablecoin is a crypto token designed to stay worth a fixed amount of something else, such as one US dollar. That fixed link is called a peg.
Most stablecoins are pegged to a government-issued currency, also called fiat money. As of September 2026, more than 99% of all stablecoin value is tied to the US dollar, according to DefiLlama, a crypto data site. Euro stablecoins and others exist, but they are much smaller.
Like other cryptocurrencies, stablecoins live on blockchains, and you can hold them in a crypto wallet. The difference is what stands behind the price. Bitcoin has no issuer and no assets behind it (see what backs cryptocurrency). A typical stablecoin has an issuer that holds assets to support its value. Even so, a stablecoin is not money in a bank.
How do stablecoins keep their peg?
Most stablecoins keep their peg through creation and redemption. The issuer creates new tokens when approved customers pay in dollars, and removes tokens when customers hand them back for dollars.
This two-way door pulls the market price back toward $1. If a stablecoin trades below $1, a customer who can redeem with the issuer can buy it cheaply and redeem it for a full dollar. If it trades above $1, they can create new tokens and sell them.
This only works while the issuer holds enough assets and keeps honoring redemptions. Most individuals cannot redeem directly with the largest issuers: as of September 2026, Tether deals only with verified customers, with a US$100,000 minimum, and Circle says its minting service is not available to individuals. The price can still drift a little, and further in a crisis.
What are the main types of stablecoins?
There are four main types of stablecoins, based on what backs them: fiat-backed, crypto-backed, commodity-backed and algorithmic.
Fiat-backed stablecoins
The issuer holds reserves such as cash, bank deposits and short-term US Treasury bills, and says each token is backed one for one. USDT, issued by Tether, and USDC, issued by Circle, are the largest examples. Both publish regular reports on their reserves. The risk sits with the issuer and with the banks and funds that hold the reserves.
Crypto-backed stablecoins
These are created when users lock other crypto in smart contracts as collateral. Dai and USDS, two tokens from the Sky Protocol that can be swapped one for one, are examples. If the collateral loses too much value, the system automatically sells it to cover the stablecoins issued. This is called a liquidation.
Crypto-backed coins can still depend on fiat-backed ones. In March 2023, Dai briefly lost its peg because it could be swapped one for one with USDC, which was falling at the time, according to a Federal Reserve analysis.
Commodity-backed stablecoins
These are tied to a physical asset, usually gold. For example, Paxos says each Pax Gold (PAXG) token is backed by one fine troy ounce of gold stored in London vaults. Its price follows gold, so it is stable against gold, not against the dollar.
Algorithmic stablecoins
These try to hold a peg with code and incentives instead of reserves. The most famous example failed. TerraUSD (UST) was meant to hold its dollar peg by being interchangeable with a sister token, LUNA. In May 2022, UST lost its peg, and the prices of UST and LUNA fell close to zero, according to the US Securities and Exchange Commission (SEC).
What are the biggest stablecoins?
As of September 2026, Tether’s USDT is the largest stablecoin and Circle’s USDC is the second largest, according to DefiLlama. Together they make up more than 80% of the roughly $313 billion held in stablecoins. Because each coin is worth about $1, the amount in circulation is close to its market cap.
| Stablecoin | Issuer or project | Type (DefiLlama label) | Amount in circulation |
|---|---|---|---|
| USDT | Tether | Fiat-backed | About $183.8 billion |
| USDC | Circle | Fiat-backed | About $74.8 billion |
| USDS | Sky Protocol | Crypto-backed | About $6.7 billion |
| USDe | Ethena | Crypto-backed | About $4.9 billion |
| DAI | Sky Protocol | Crypto-backed | About $4.8 billion |
The labels are DefiLlama’s, and coins in the same group do not all work the same way. Ethena, for example, says USDe is a “synthetic dollar” backed by crypto and matching short futures positions, and that it is not the same as a fiat stablecoin like USDC or USDT.
To learn more about the two largest coins, read what Tether (USDT) is, what USDC is and our USDT vs USDC comparison. Stablecoins also come and go: Paxos stopped issuing new BUSD, a Binance-branded dollar stablecoin, in February 2023, as directed by New York’s Department of Financial Services. Our guide to what happened to BUSD tells that story.
What are stablecoins used for?
People mostly use stablecoins to hold or move a dollar value on a blockchain without going back to a bank. Common uses include:
- Trading: many crypto platforms price other coins against stablecoins, so traders can switch between coins without cashing out to a bank account.
- Taking a pause: holders move into a stablecoin to step out of more volatile coins for a while.
- Sending money: stablecoins can move between wallets on any day of the week, which some people use for payments across borders.
- DeFi: decentralized finance (DeFi) apps use stablecoins for lending and trading, which adds risks of its own, such as software bugs.
What are the risks of stablecoins?
The main risks are losing the peg, weak reserves, issuer control and changing rules. A stablecoin is designed to be steady, but you can still lose money holding one.
- Losing the peg: TerraUSD fell close to zero in 2022. USDC fell to about 86 cents in March 2023, when part of its reserves was stuck at the failed Silicon Valley Bank, and recovered within days, according to a Federal Reserve analysis.
- Reserve risk: a stablecoin is only as sound as the assets behind it. In 2021, the US Commodity Futures Trading Commission (CFTC) found that in a 26-month sample period, Tether held enough fiat reserves to back all USDT on only 27.6% of days.
- Issuer control: issuers can freeze tokens, block addresses or stop issuing a coin, as Paxos did with BUSD. In April 2026, Tether said it helped US authorities freeze more than $344 million of USDT held at two addresses.
- No deposit protection: stablecoins are not bank deposits, and government deposit insurance does not cover them.
- Transfer mistakes: sending on the wrong network or to the wrong address can lose your coins, because blockchain transactions cannot be reversed.
- Rule changes: new laws can change which stablecoins platforms may offer where you live.
Past performance does not predict future results. A stablecoin that has held its peg can still lose it.
Scammers like stablecoins too. Never send them to someone who contacts you offering to protect or recover your funds, and read how to protect yourself from fraud.
How does the US GENIUS Act treat stablecoins?
The GENIUS Act is the US federal law for payment stablecoins, the kind pegged to a fixed amount of money. It was signed on July 18, 2025.
Once it takes effect, only permitted issuers may issue payment stablecoins in the US. They must hold at least one dollar of approved reserves, such as cash, bank deposits and short-term US Treasury bills, for every token, and publish the makeup of those reserves every month. They may not pay holders interest or yield just for holding the coin. The Act also says payment stablecoins are not backed by the US government and are not covered by deposit insurance.
The Act takes effect on January 18, 2027, or 120 days after US regulators issue final rules, whichever comes first. As of September 2026, regulators had published proposed rules but no final rules. From July 2028, crypto service providers may offer people in the US only stablecoins from permitted issuers, with some exceptions for foreign issuers.
How does the EU’s MiCA law treat stablecoins?
In the EU, stablecoins fall under MiCA, the Markets in Crypto-Assets Regulation. Its stablecoin rules have applied since June 30, 2024.
MiCA calls a stablecoin tied to one official currency an e-money token, and one tied to other assets or a mix of them an asset-referenced token. An e-money token may be offered to the public only by its issuer, or with its consent, and the issuer must be authorized as a bank or an electronic money institution. Holders can redeem it with the issuer at any time at face value. Issuers and crypto service providers may not pay interest on stablecoins.
In January 2025, ESMA, the EU markets authority, said crypto platforms in the EU should stop offering stablecoins that do not comply with MiCA by the end of March 2025, while holding, transferring and selling them could continue. As of September 2026, ESMA’s register of e-money token issuers lists Circle’s French company, which issues USDC, but no Tether company.
So which stablecoins you can get depends on where you live. Check the rules in your country before you buy or hold one.
How can you check a stablecoin before you hold it?
Check four things: who issues it and what backs it, how it has held its peg, which network it uses and the rules where you live.
- Read the issuer’s latest reserve report. Check its date, who prepared it and whether it is an attestation (a check at one point in time) or a full audit.
- Look at the peg history. See how the coin behaved in past market stress, such as May 2022 and March 2023.
- Check the network. Make sure your wallet supports the blockchain the stablecoin will be sent on, and use an address on that same network.
- Check local rules. US and EU rules treat issuers differently, and platforms may offer different coins in different countries.
Sources
- DefiLlama: Stablecoins by market cap (checked September 2026)
- US Government Publishing Office: Public Law 119-27, the GENIUS Act (July 18, 2025) (checked September 2026)
- Federal Register: GENIUS Act Regulations on Payment Stablecoin Issuance, Offer, and Sale, proposed rule (August 18, 2026) (checked September 2026)
- OCC: News release 2026-69 on next steps for the GENIUS Act (August 19, 2026) (checked September 2026)
- EUR-Lex: Regulation (EU) 2023/1114 on markets in crypto-assets (MiCA), articles 3, 40, 48, 49, 50 and 149 (checked September 2026)
- ESMA: Public statement on crypto-asset services for non-MiCA-compliant ARTs and EMTs (January 17, 2025) (checked September 2026)
- ESMA: Markets in Crypto-Assets Regulation (MiCA) and interim MiCA register (checked September 2026)
- US Securities and Exchange Commission: Press release 2023-32 on Terraform Labs (February 16, 2023) (checked September 2026)
- Federal Reserve: FEDS Notes, lessons from the Silicon Valley Bank failure and its impact on stablecoins (December 17, 2025) (checked September 2026)
- CFTC: Press release 8450-21 on Tether and Bitfinex (October 15, 2021) (checked September 2026)
- Tether: Freeze of more than $344 million in USDT (April 23, 2026) (checked September 2026)
- Tether: Transparency (checked September 2026)
- Tether: Fees (minimum direct purchase and redemption) (checked September 2026)
- Circle: USDC transparency and reserves (checked September 2026)
- Circle: Circle Mint (checked September 2026)
- Sky Protocol docs: Collateral liquidation (checked September 2026)
- Sky Protocol docs: USDS (checked September 2026)
- Ethena: Overview (USDe) (checked September 2026)
- Paxos: Pax Gold (PAXG) (checked September 2026)
- Paxos: Paxos will halt minting new BUSD tokens (February 13, 2023) (checked September 2026)
