Stablecoins

A stablecoin is a cryptocurrency whose value is pegged to a stable reference asset — most commonly the US dollar. Unlike volatile cryptocurrencies like Bitcoin or Ethereum, stablecoins are designed to maintain a 1:1 value with their peg, making them suitable for payments, lending, and as a unit of account in DeFi.

Types of Stablecoins

Fiat-Collateralised

Backed 1:1 by reserves of fiat currency or equivalent assets held by a centralised issuer.

• USDT (Tether) — largest by market cap, backed by a mix of cash, treasuries, and commercial paper
• USDC (Circle) — fully backed by cash and short-term US treasuries, regularly audited

Crypto-Collateralised

Backed by cryptocurrency deposits locked in smart contracts, typically over-collateralised.

• DAI (MakerDAO) — decentralised, backed by ETH and other crypto assets at 150%+ collateral ratio

Algorithmic

Use algorithms and market incentives to maintain the peg without full collateral backing.

• UST (Terra/Luna) — collapsed in May 2022, losing $40 billion and demonstrating the fragility of purely algorithmic designs

Why They Matter

Stablecoins have become the most practically useful application of blockchain technology:

• $300+ billion in circulation as of late 2025
• $10+ trillion in annual transaction volume — exceeding Visa
• Cross-border payments — instant, low-cost transfers without correspondent banking
• DeFi backbone — the primary medium of exchange in decentralised finance
• Emerging market adoption — dollar access for populations with unstable local currencies
• Agent payments — the natural payment rail for AI agent-to-agent transactions

Regulatory Landscape

Stablecoins are the most regulated corner of crypto:

• EU MiCA — comprehensive framework requiring reserves, audits, and licensing for issuers
• US GENIUS Act — stablecoin-specific legislation passed in 2025
• Bank issuance — major banks beginning to issue their own stablecoins under existing banking frameworks

The Thesis

Stablecoins are the fabric of global trade in the digital age. They combine the stability of the dollar with the programmability of blockchain, creating a payment rail that works 24/7, settles instantly, and costs a fraction of traditional wire transfers. As AI agents become economic participants, stablecoins will be their native currency.