Are stablecoins stable? Come on, it’s in the name!
Of course, the crypto industry has certainly seen some misnamed categories. Anyone remember NuBits? Surely you lost money on Terra? Last year, DeFi stables including Synthetix and Ethena lost their foothold. And even robust stablecoins like USDC and Circle’s Tether have seen a temporary pullback over the years.
It appears that fundamental questions about stablecoins could actually reveal important avenues for research, particularly regarding the structural risks of a nascent technology. As industries look to adopt stablecoins – sometimes even bypassing the much more proven traditional financial system – it’s probably worth revisiting the answers to these fundamental questions.
At CoinDesk University’s School of Stablecoins, taking place at Consensus 2026, May 5-7 in Miami, we’ll dig beneath the surface of these questions to give you a clear understanding of why stablecoins are the future and how to implement them in your business to reap the benefits.
What is a stablecoin and how is it different from Bitcoin?
Sam Broner, founder of Better Money Company, told CoinDesk that he still receives these questions regularly. Ultimately, we are still so early in the life cycle of this technology. While a stablecoin is a cryptocurrency that maintains a constant price by being tied to an asset, such as the US dollar, the price of bitcoin rises and falls based on supply and demand.
Why can’t I just use Fiat?
This is a deceptively important question. The idea behind stablecoins, and cryptocurrencies in general, is that they were designed for the internet age we currently live in. Money should be like the Internet: global, real-time, programmable and composable. This breaks new ground from the often clunky architecture of the traditional financial system, where decades of band-aids on archaic core infrastructure have led to high fees, slow settlement and inflexible services. So you can use fiat, but in our sessions we think you will be convinced that stablecoins are the future.
What keeps the price of a stablecoin at $1?
Just like fiat (and crypto) currencies, there are different types of stablecoins.
Some maintain their anchor by having the same amount of dollar (or euro or whatever fiat currency of choice) collateral in their coffers. This mechanism design is called fiat collateral, and it’s how stablecoins like USDC work: they are 100% backed by cash or cash-equivalent assets and are effectively redeemable 1:1 with them.
Other stablecoins have what is called overcollateralization, such as DAI. MakerDAO’s DAI stablecoin is backed by overcollateralized loans: it maintains its peg to the dollar by locking other assets into contracts as collateral for the creation of the DAI.
The final, slightly controversial type of stablecoin relies on algorithmic stabilization, meaning computer algorithms are designed 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 on, it has also led to huge failures, subsequently wiping millions of dollars out of the ecosystem.
Still confused? Join one of our CoinDesk University’s Stablecoin School sessions to talk to the people who are actually building Stablecoin technology for consumers and businesses.
Who really has the money?
With fully collateralized stablecoins, the issuer owns the money. However, this does not mean that a stablecoin issuer has a bank account and deposits $1 every time a new stablecoin is created.
Instead, reserves of fiat-backed stablecoins are typically held by custodians like BlackRock or BNY Mellon. And since each stablecoin issuer decides what its collateral looks like – whether it’s cash or other highly liquid assets – the type of custodian it uses will vary depending on what actually constitutes the reserve.
For oversized stablecoins or coins with algorithmic backing, issuers typically hold their version of reserves in smart contracts or blockchain-based wallets.
How to get a stablecoin?
“Even established banks, fintechs and payment companies that move millions of dollars in transactions every day are wondering this,” says Broner of Better Money Company. “And that’s a good question, because 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, as well as 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 Stablecoin School, you’ll hear from experts in the field about the digital storefronts you can go to to get your hands on stablecoins and what you can do with them afterward.
What happens if everyone trades their stablecoins at the same time?
The US dollar was on the gold standard until 1971 – this meant you could walk into your bank and demand an equal amount of gold in exchange for dollars at any time. If you did that now, people would laugh at you. But fiat-based stablecoins still work this way.
If you own a 100% backed USD stable, you can exchange it for dollars at any time. If everyone with this dollar-backed stable went to the issuer to get their dollars at exactly the same time (a probabilistic nightmare), hypothetically everyone would get their money back – it might not be instantaneous.
As the stablecoin market has grown, issuers have moved away from full cash reserves and instead filled their reserves with Treasuries and bonds, all of which should be highly liquid. But as the collapse of Silicon Valley Bank showed, when people “run on a bank” that holds stablecoins, the dollar peg can get a little shaky.
What if the government banned stablecoins?
It’s not as far-fetched as it might seem. In the United States, the long-awaited CLARITY Act has been delayed by unresolved issues, such as the ban on stablecoin yield (an understandably tricky issue). Companies using stablecoins have been reluctant to stay on the right side of regulation, even as they received mixed signals from Washington.
Whether CLARITY ends up being adopted or not, there are still many things to consider when using stablecoins in the United States. That’s why we invited the Blockchain Association and some of its partners to break down exactly what your business needs to know when it comes to policy and compliance.
Are stablecoins safe?
You’ve read headlines about people losing millions of dollars in cryptocurrency, whether by losing their private keys, investing in a scam, or having a project hacked. As we mentioned above, depending on the type of stablecoin you invest in, there may be more or less risk associated.
According to Broner, however, this is rapidly changing as laws, such as the GENIUS Act, are passed requiring stablecoin issuers to hold secure collateral as reserves and introducing federal requirements for oversight and transparency.
“For an industry that’s trying to gain the trust of the general public, that’s exactly the foundation you need,” Broner says.
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 commerce.
