What Are Crypto Stablecoins?
People in emerging-market countries across the world, from Venezuela to Nigeria, increasingly keep their savings in them and use them to send billions of dollars' worth of remittance payments each year. A group of 21 major banks, including Goldman Sachs (GS) and Bank of America (BAC), recently said they would form a company to issue one of their own. And U.S. Treasury Secretary Scott Bessent has said they could help the government manage its debt and promote global dollarization.
They're stablecoins. Conceived in the cryptocurrency ecosystem, stablecoins are a tiny but rapidly growing presence in the world's financial plumbing. So far, their potential applications have captured more imaginations than actual deposits—total market cap was only about $260 billion as of September 2026, roughly one sixth the size of the bitcoin market. But in its bullish estimate, revised in September 2025, Citi said the supply of stablecoins could grow more than tenfold to $4 trillion by 2030.
Whatever the actual pace of future growth, stablecoins have the attention of the finance world. Beyond the world of blockchains and crypto trading, many financial companies see them revolutionizing global payments systems, while residents of inflation-afflicted countries see them as a dollar-based store of value that could help preserve their cash savings.
What are stablecoins?
A stablecoin is a type of cryptocurrency designed to maintain a stable value backed by a non-crypto asset. In its most common usage, it's a digital token investors use to park money in the crypto ecosystem when they don't want to hold other cryptocurrencies or move their assets off chain into fiat currencies.
Stablecoins are recorded on blockchains, digital distributed ledgers, and can be used as a means of trade settlement. They enable traders to hold and move dollar-like value on chain, reducing the need for commercial banking rails when switching between crypto assets or exchanges. In the crypto trading ecosystem, stablecoins can also be used to post collateral for loans and derivatives or to move funds between exchanges.
The key to stablecoins' popularity is the roughly 1:1 peg to the U.S. dollar that most of them maintain and that keeps the currency's value, well, stable.
As of September 2026, the two dominant stablecoins are tether (USDT), with a supply of about $183 billion, and USDC, with about $75 billion. Tether is issued and managed by an El Salvador-based company of the same name, and is the dominant stablecoin used outside of the United States, particularly in emerging markets. USDC is issued and managed by U.S.-based Circle Internet Group (CRCL).
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How does a stablecoin dollar peg work?
Not all stablecoins work the same. Some smaller ones are synthetic or algorithmic. But under the 2025 U.S. GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act, issuers of U.S.-regulated stablecoins will be required to back their tokens 1:1 with shorter-duration U.S. Treasury bonds, cash, or other government-linked, low-risk instruments. They will also be legally obligated to redeem tokens for a fixed monetary value of $1 each to token holders requesting cash conversion.
In practice, companies such as Circle issue a token to a stablecoin buyer, then use proceeds from the sale to buy Treasuries or other cash-like, short-term investments. The issuer is allowed to keep any interest it earns, but under the Genius Act it will be prohibited from paying interest to stablecoin buyers. Thus, a U.S.-issued stablecoin will be much like a short-term, relatively low-risk IOU.
Stablecoin usage, players, and scale
While the potential applications of stablecoins have generated great interest among financial institutions, so far crypto trading and related activities remain the dominant use of stablecoins, accounting for an estimated half of all stablecoins in circulation, according to a 2026 study by the Federal Reserve Bank of Kansas City.
Stablecoins can be issued on several public blockchains. As of September 2026, 48% of stablecoin value sat on Ethereum, 31% on Tron, and 5.3% on Solana, with the rest spread among other blockchains, according to data from DefiLlama.
Stablecoin supply since 2020
Source: Glassnode
For illustrative purposes only.
Stablecoin payments
Cross-border payments may offer the most readily adaptable commercial use of stablecoins outside crypto markets. People and businesses can use stablecoins to bypass slow payment infrastructure and avoid red tape. Unlike bank transfers, stablecoin payments can move between digital wallets at any hour of the day or night, with nearly instantaneous settlement.
The total volume of stablecoin payments grew 39% in 2025 from a year earlier, according to a February 2026 report by Allium, a blockchain data provider. The biggest growth by percentage was in consumer-to-consumer payments, which totaled $118 billion, an increase of 73% from a year earlier, Allium said.
The technology's business potential is clear. In May 2026, Western Union (WU) launched its own dollar-pegged stablecoin, USDPT, built on the Solana blockchain. The next month, Open Standard—a network of more than 140 businesses, including Visa (V), Mastercard (MA), and Coinbase (COIN)—said it would launch a joint stablecoin called Open USD, which was expected to go live by the end of 2026.
Stablecoins as a shelter against inflation
Many people in countries with high inflation are putting at least a share of their financial assets into stablecoins, which they see as a store of value relative to the local currency, thanks to the U.S. dollar peg. Goldman Sachs estimated in February 2026 that about two-thirds of the world's stablecoins are held by individuals in emerging markets, and the International Monetary Fund found that countries with higher inflation and more volatile exchange rates saw bigger inflows of stablecoins.
Stablecoins and U.S. economic policy
Dramatic growth in global stablecoin issuance could have significant implications for U.S. policymakers, perhaps affecting interest rates and the dollar, while giving the U.S. more influence over the evolving digital payment infrastructure.
The GENIUS Act's requirement that stablecoins be backed 1:1 with only certain liquid assets—particularly shorter-duration Treasuries—could help the U.S. government manage its ballooning debt and promote a stronger U.S. dollar.
Bessent has talked about stablecoin growth as a potentially significant source of new demand for Treasuries, citing the $4 trillion estimate and noting that it "could lower government borrowing costs." Stronger demand for Treasuries usually means lower rates, and lower rates on short-term Treasuries tend to weigh on long-term rates.
"A well-regulated, dollar-based stablecoin market can reinforce the global role of the U.S. dollar and extend its network effects into emerging digital payment systems," he said in February 2026.
Stephen Miran, a Trump appointee to the Federal Reserve board, said the GENIUS Act could lead to a "global stablecoin glut" similar to the global "savings glut" that helped keep U.S. interest rates low in the 2000s.
Further U.S. dollarization would keep the U.S. at the center of the evolving global digital payments system and reinforce U.S. economic power. With most stablecoin transactions taking place internationally, big growth in stablecoin use could also "have the potential to ensure American dollar dominance," White House AI and crypto czar David Sacks said in early 2025.
Stablecoin risks
As of June 2026, the Tether stablecoin held about $115 billion in Treasuries, which would rank it 19th among countries and territories, just ahead of the United Arab Emirates. As of May 2026, it also owned an estimated 154 tons of gold, which would rank its holdings among the top 20 central banks worldwide. In other words, Tether is already a significant presence in global markets.
Comparing Tether's holdings of U.S. Treasuries
Source: U.S. Treasury Department
For illustrative purposes only.
Dramatic growth in stablecoin issuance could expand issuers' market footprints, perhaps raising risks, particularly if crypto trading continues to rank as the top use of stablecoins. Increased volumes of stablecoin trading could result in liquidity issues or even a bank run in cases of market stress.
Tether and Circle have been tested already. Tether's dollar peg was stressed during the 2022 crypto crash, when USDT briefly traded near $0.95 as investors fled the market, redeeming about $16 billion of USDT during the second quarter of the year. In March 2023, Circle's USDC lost its peg after it disclosed that about 8% of its reserves were trapped at the failed Silicon Valley Bank. At one point, USDC traded as low as $0.87.
In both cases, the effect on traditional financial markets was negligible to nonexistent. Commenting on Tether's stress, then-U.S. Treasury Secretary Janet Yellen said stablecoin issuers like Tether didn't yet pose a systemic risk because their holdings were too small. But she noted that those holdings were growing rapidly.
The potential proliferation of stablecoins is raising a range of additional concerns. Some analysts warn that a flight from bank deposits to stablecoins could force banks to cut lending, while others say that, if stablecoin volumes reach $2 trillion or more, any crisis of confidence could trigger a run, disrupting Treasury-bill and repo markets. A Federal Reserve staff paper published in April 2026 warned that increasingly complex stablecoin interconnections, and their relative opacity, could precipitate crises of confidence, triggering "disruptive runs or market freezes."
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