Are stablecoins stable? Come on, it’s in the name!
Of course, the crypto industry has certainly seen categories misnamed. Anyone remember NuBits? You must have lost money in Terra? Just last year, DeFi stables including Synthetix and Athena lost their peg. And even robust stablecoins like Circle’s USDC and Tether have experienced temporary depegging over the years.
It seems that fundamental questions about stablecoins can indeed uncover important lines of inquiry, especially as they relate to the structural risks of a new technology. As industries look to adopt stablecoins — sometimes even bypassing the much more battle-tested traditional financial system — it’s probably worth revisiting the answers to these fundamental questions.
During CoinDesk University’s School of Stablecoins, taking place at Consensus 2026, 5-7 May in Miami, we will dig beneath the surface of these questions to give you a strong understanding of why stablecoins are the future and how to implement them in your business to reap benefits.
What is a stablecoin and how does it differ from Bitcoin?
Sam Broner, founder of the Better Money Company, told CoinDesk that he still gets these questions regularly. Bottom line, then: we’re still so early in this technology’s life cycle. While a stablecoin is a cryptocurrency that maintains a consistent price by being tied to an asset, such as the US dollar, bitcoin’s price moves up and down depending on supply and demand.
Why can’t I just use fiat?
This is a deceptively important question. The idea behind stablecoins and cryptocurrency in general is that it was built for this internet age we now live in. Money needs to be like the internet – global, real-time, programmable and composable. This revamps the often clunky architecture of the traditional financial system, where decades of band-aids on an archaic core infrastructure have led to high fees, slow settlement and inflexible services. So you can use fiat, but during our sessions we think you will be convinced that stablecoins are the future.
What keeps a stablecoin’s price at $1?
Like fiat (and crypto), there are different types of stablecoins.
Some maintain their bond by having the same amount of collateral in dollars (or euros or whatever they choose) in their coffers. This mechanism design is called fiat collateralized and is how stablecoins like USDC work – they are backed 100% by cash or liquid assets and can actually be redeemed 1:1 with them.
Other stablecoins have what is known as overcollateralization, like DAI. MakerDAO’s stablecoin DAI is backed by oversecured loans: it retains its dollar peg by locking other assets into contracts as collateral for DAI creation.
The final, and somewhat controversial, type of stablecoins relies on algorithmic stabilization — that is, computer algorithms are built to manage supply and demand so that a coin remains pegged to $1. While this is certainly an interesting technology that will continue to be innovated, it has also led to massive failures that subsequently wipe out millions of dollars from the ecosystem.
Still confused? Attend one of our CoinDesk University’s School of Stablecoins sessions to talk to the people who are actually building the stablecoin technology for consumers and businesses.
Who really has the money?
With fully supported stablecoins, the issuer holds the money. However, this does not mean that a stablecoin issuer has a bank account and deposits $1 at a time when a new stablecoin is minted.
Instead, fiat-backed stablecoin reserves are usually held by custodians such as BlackRock or BNY Mellon. And since each stablecoin issuer decides what their collateral looks like — whether it’s cash or other highly liquid assets — the type of custodian they use will vary based on what actually makes up the reserve.
For overcollateralized stables or algorithmically backed coins, issuers usually hold their version of reserves in smart contracts or blockchain-based wallets.
How do I get a stablecoin?
“Even established banks, fintechs and payments companies that move millions of dollars in transactions every day are asking this,” says Better Money Company’s Broner. “And that’s a fair question, because the on-ramps aren’t always obvious.”
So don’t feel embarrassed if you have to ask again. In the cryptocurrency industry, there are exchanges, wallet providers, custodians, payment platforms, plus decentralized and centralized versions of all of these. The answer depends on what you are trying to do with the cryptocurrency after acquiring it.
During CoinDesk University’s School of Stablecoins, you’ll hear from experts in the field about the digital storefronts you can patronize to get your hands on stablecoins and what you can do with them afterward.
What happens if everyone redeems their stablecoins at once?
The US dollar was on the gold standard until 1971 – this meant you could walk into your bank at any time and demand an equal amount of gold in exchange for dollars. If you did it now, you’d be laughed out of the bank. But fiat-based stablecoins actually still work this way.
If you own a USD-backed stable that is 100% secured, you can redeem it for dollars at any time. If every single person who owned the USD backed stable went to the issuer to get their dollars at the exact same time (a likely nightmare), hypothetically, everyone would get their money back – it just wouldn’t be instantaneous.
As the stablecoin market has grown, issuers have moved away from full cash reserves and are instead filling their reserves with Treasuries and bonds, all of which should be highly liquid. But as the Silicon Valley Bank collapse showed, when people “run a bank” that holds stablecoins, the dollar peg can get a little shaky.
What if the government bans stablecoins?
This is not as far-fetched as it might sound. In the US, the long-awaited CLARITY Act has been held up by unresolved issues, such as banning stablecoin dividends (a legally unclear issue). Companies using stablecoins have been careful to stay on the right side of regulation, even while getting mixed signals from Washington.
Regardless of whether CLARITY ends up passing or not, there is still a lot to be aware of when using stablecoins in the US. That’s why we invited the Blockchain Association and some of its partners to break down exactly what your business needs to know about policy and compliance.
Are stablecoins safe?
You’ve read the headlines about people losing millions of dollars in cryptocurrency, whether they lose their private keys, invested in a scam, or a project that gets hacked. As we mentioned above, depending on the type of stablecoin you invest in, there may be more or less risks involved.
According to Broner, however, that is rapidly changing as legislation, such as the GENIUS Act, is passed, mandating that stablecoin issuers hold safe collateral as reserves, and introducing federal oversight and transparency requirements.
“For an industry trying to gain mainstream trust, that’s exactly the foundation you need,” says Broner.
Join us live at Consensus 2026 for our School of Stablecoins workshop series to learn more about how you can implement this new payment method for faster, cheaper and more programmable transactions in this new era of business.
