Topic
What is a stablecoin?
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- Quick fact 1
A stablecoin is a crypto token built to keep a steady value, usually $1.
- Quick fact 2
Most are backed by reserves like cash and short-term US government debt.
- Quick fact 3
A stablecoin can still lose its $1 value. That's called a depeg.
The short lesson
Most crypto prices go up and down a lot. A stablecoin is designed not to. Most stablecoins aim to always be worth one US dollar.
The most common kind is backed by reserves. A company issues one token for every dollar (or dollar-like asset) it holds. If you hand back a token, the company is supposed to give you a dollar back. The promise is only as strong as those reserves and the company holding them.
People talk about stablecoins because they move like crypto but are priced like dollars. Someone in Medellín or Hyderabad might hear about them as a way to hold or send dollar value. That's exactly why it's worth understanding the risks first:
- A stablecoin isn't a bank deposit. It isn't covered by FDIC insurance.
- Reserves matter. If an issuer doesn't really hold what it says, the $1 value can break.
- Some designs have failed. In 2022, a stablecoin called TerraUSD, which relied mostly on code instead of cash reserves, collapsed and lost almost all of its value.
- Network mistakes are final. Sending a stablecoin on the wrong blockchain can mean losing it.
In 2025, the United States passed the GENIUS Act, its first federal law for payment stablecoins. Once it takes effect, it requires issuers to hold full reserves and publish reports on them. Our GENIUS Act lesson explains it in plain English.
Related terms
Common questions
Is a stablecoin the same as a dollar in the bank?
No. It's a token issued by a company. It isn't FDIC-insured, and getting dollars back depends on the issuer.
Can a stablecoin lose its value?
Yes. If people stop trusting the reserves, or the design fails, the price can fall below $1. This is called a depeg.
Do stablecoins pay interest?
Under the GENIUS Act, US payment stablecoin issuers can't pay interest to holders. Offers of "yield" usually come from other platforms and carry extra risk.
What are USDT and USDC?
They're two widely used dollar stablecoins from different companies. Our USDT lesson explains how they differ.