Guides · Cryptocurrencies
What is a stablecoin?
In short: A stablecoin is a crypto designed to keep a stable value, often 1 dollar or 1 euro, usually thanks to reserves held by its issuer. It is mainly used to move between cryptos without going back to regular money.
How it works
The issuer is supposed to hold reserves (cash, government bonds) equal to the stablecoins issued. Regulators increasingly set rules for issuers.
The risks
If reserves are insufficient or trust disappears, a stablecoin can lose its peg. In 2022 the algorithmic stablecoin TerraUSD collapsed, causing huge losses.
It is not a bank account
A stablecoin is not covered by bank deposit insurance. Yields offered for "lending" it come with risks.