A stablecoin is a cryptocurrency designed to hold a steady value, almost always one US dollar, rather than fluctuating like Bitcoin. It pairs the settlement speed of crypto with the price stability of traditional money.
By size, the category has become one of crypto's largest. Total stablecoin supply grew from about $27 billion at the end of 2020 to roughly $316 billion by June 2026, and reached a record above $323 billion in May 2026. Tether's USDT holds around 59% of that supply and Circle's USDC about 24%, a combined 83% of the market.
What stablecoins are actually used for
Not speculation. Stability is the entire point of the design.
- Parking capital between trades without converting back to fiat, since that conversion is slow and expensive.
- Cross-border payments settling in minutes rather than through correspondent banking chains.
- A dollar substitute in countries with high inflation or restricted access to dollars.
- Collateral and settlement in DeFi, where most lending and borrowing is denominated in stablecoins.
- The base currency of trading pairs. USDT is the most liquid quote asset on nearly every major exchange.
Beyond the headline supply figure, actual usage runs considerably higher. Adjusted transfer volume reached roughly $9 trillion over a trailing year according to a16z, measuring payments rather than parked balances.
The three designs
| Type | How the peg holds | Examples | Main risk |
|---|---|---|---|
| Fiat-backed | Reserves of cash and short-term government debt held by an issuer | USDT, USDC, PYUSD | Issuer and reserve quality |
| Crypto-collateralized | Overcollateralized with crypto locked in smart contracts | DAI, LUSD | Smart contract and liquidation risk |
| Algorithmic | Supply expands and contracts by formula, with no full backing | UST, now defunct | Reflexive collapse |
Dominating by an enormous margin is the fiat-backed design, and the reason sits in the third row.
Why algorithmic stablecoins failed
Every explanation returns to TerraUSD, and the case deserves the space.
UST maintained its peg through an arbitrage loop with a companion token, LUNA. One dollar of UST could always be redeemed for one dollar of newly minted LUNA. In theory, trader incentives kept the peg stable.
While LUNA held value, the design worked. When UST slipped below its peg in May 2022, redemptions minted enormous quantities of LUNA, pushing LUNA's price down, which triggered more redemptions and more minting. Once LUNA's market cap fell below UST's circulating supply, the backing was arithmetically insufficient. There was nothing left to redeem against. The whole structure unwound in roughly 72 hours, wiping about $40 billion in value across the Terra ecosystem.
Regulators drew a conclusion from it. MiCA in the European Union now prohibits algorithmic mechanisms. FRAX restructured from semi-algorithmic to fully collateralized in 2023 in response.
Depegs, and what causes them
A depeg is any sustained deviation from the target price. Small ones happen constantly and close within minutes, much as they do on any trading pair under momentary pressure. The instructive cases are the larger ones.
- Reserve exposure. USDC fell to roughly $0.87 in March 2023 after part of Circle's cash reserves were held at Silicon Valley Bank. The reserves were ultimately recovered and the peg restored, and the fear was about access rather than solvency.
- Confidence runs. USDT traded near $0.945 during the 2022 turmoil. Redemption pressure drove it, not any confirmed shortfall.
- Algorithmic failure. UST to zero.
- Regulatory action. BUSD wound down after Paxos was ordered to stop minting in February 2023. Supply fell from about $16 billion to under $50 million by Q4 2024, with the peg intact throughout.
- Liquidity gaps. Thin pools on a specific venue can produce a local depeg while the asset trades normally elsewhere.
Only one of those was a failure of the coin itself. The rest failed around it.
How to assess a stablecoin
- What backs it, specifically. Cash and short-term Treasury bills are different from commercial paper or crypto collateral.
- Who attests to the reserves, how often, and whether it is a full audit or a lighter attestation. Tether publishes quarterly attestations and reported a $113 billion Treasury position in Q1 2026.
- Redemption rights. Whether you can actually redeem at par, and who qualifies to do so.
- Regulatory standing. USDC is built for regulated US and European frameworks. USDT is not MiCA-compliant, which affects where it can be offered.
- Chain concentration. Across the blockchain landscape the supply is uneven: Ethereum held roughly $170 billion in stablecoins in April 2026, about 60% of global supply, with TRON second at about $87 billion.
- Freeze capability. Centralized issuers can freeze addresses, which protects against theft and means your balance is not unconditionally yours.
Where mb.io fits
Serving as the base currency of most crypto trading, stablecoins make where you hold them a question about counterparty risk.
mb.io is a regulated crypto spot exchange backed by MultiBank Group, a financial institution founded in 2005 that serves more than 2 million clients across 100+ countries.
- Regulated by VARA in the UAE and AUSTRAC in Australia
- 10/10 security score from Hacken, an independent blockchain security auditor
- Institutional-grade MPC custody powered by Fireblocks, with segregated client funds
- Fiat on and off ramps supporting Visa, Mastercard, SWIFT, and PIX
- Buy, sell, and swap in three steps, from sign-up to purchase
- 24/7 customer support, on web and on the iOS and Android apps
Open your account and start trading on mb.io.
Frequently asked questions
How do stablecoins stay at one dollar?
Fiat-backed coins hold reserves and honour redemptions at par. Arbitrage traders then correct any deviation. Crypto-collateralized coins use overcollateralization and automatic liquidations. Algorithmic designs used supply adjustments, and that approach failed.
Are stablecoins actually safe?
Fully reserved coins from established issuers have held their pegs through severe market stress, with brief exceptions tied to specific events. The risk sits with the issuer, its reserves, and its banking relationships. Crypto volatility is not the concern here.
What happened to Terra's UST?
Its peg depended on minting a companion token, LUNA, during redemptions. When UST slipped, the resulting LUNA supply crushed LUNA's price, which drove further redemptions. The loop unwound in about 72 hours in May 2022, wiping roughly $40 billion.
What is the difference between USDT and USDC?
Both are fiat-backed dollar stablecoins. USDT is larger, at roughly 59% of supply, and skews toward offshore and emerging-market demand. USDC holds about 24% and is the default inside regulated US and European frameworks.
Can a stablecoin issuer freeze my funds?
Centralized issuers including Tether and Circle can freeze specific addresses, and both have done so at the request of law enforcement. That capability is a feature for recovering stolen funds and a limitation on unconditional ownership.
What is a depeg?
Any sustained deviation from the target price. USDC reached about $0.87 in March 2023 during the Silicon Valley Bank episode, and USDT traded near $0.945 during 2022 redemption pressure. Both recovered.
Are stablecoins regulated?
Increasingly. MiCA governs them in the European Union and prohibits algorithmic designs. Other jurisdictions have introduced or are introducing frameworks, and requirements differ enough that some stablecoins cannot be offered in some markets.
