Stablecoins are one of the biggest drivers behind the growth of digital money in 2025. They are used for trading, paying employees, sending money overseas, and even saving in countries with unstable local currencies. You may have seen names like “USDT” or “USDC” in the news or on social media. They combine the stability of traditional money with the speed and reach of blockchain networks. This means you can send value instantly to almost anyone in the world using only a phone or computer.
In this guide, we explain what stablecoins are, how they work, why people use them, and the risks to keep in mind.
A stablecoin is a cryptocurrency designed to keep its value steady, usually at 1 unit per U.S. dollar. This is different from coins like Bitcoin or Ethereum, which can go up or down in price very quickly.
Stablecoins are issued as tokens on blockchains such as Ethereum, Solana, or Tron. Behind each token is some form of backing. The most common type holds real dollars or safe, liquid assets like U.S. Treasury bills to match the number of coins in circulation.
In short, stablecoins are meant to be as reliable as money in your bank account but easier to send and use anywhere in the world.
There are three main ways stablecoins keep their value:
Fiat-backed stablecoins store traditional currency or short-term assets in reserves. For example, USDT and USDC both hold cash and government bonds to match the tokens they issue. When you give the issuer real dollars, you get digital coins. When you redeem the coin, you get your dollars back.
Crypto-backed stablecoins use other cryptocurrencies as collateral. Because crypto prices can swing a lot, they hold more in collateral than the value of coins issued. If prices drop too far, the system can sell collateral to protect the coin’s value. An example is DAI.
Algorithmic stablecoins try to control the price with code that adjusts supply and demand. These have become rare after the collapse of TerraUSD in 2022, and many remaining projects now also use extra collateral as a safety measure.
Trading and Investing
Stablecoins act like cash on crypto exchanges. They make it easy to move in and out of investments without needing to send money back to a bank account.
Payments and Remittances
People use stablecoins to send money across borders in minutes, often with lower fees than banks or remittance services. This is common among migrant workers sending money home.
Savings and Payroll
In countries with high inflation, holding stablecoins can protect savings. Some companies also pay international staff in stablecoins to avoid delays and heavy currency conversion fees.
DeFi and Smart Contracts
In decentralized finance, stablecoins are used for lending, borrowing, earning interest, and powering automated payments in smart contracts.
Stablecoins make money transfers faster and cheaper. They work 24/7, even across countries. They connect traditional finance to the blockchain world, letting people and companies use dollars in new online services and applications.
Stablecoins are not risk-free. The main concerns are:
Banks, fintechs, and even central banks are paying attention to the rapid adoption of stablecoins. Some are building their own digital currencies, known as central bank digital currencies (CBDCs).
Stablecoins are already being used for payroll, business payments, and rapid aid delivery in crises. If regulations continue to mature, they could become a standard way to move money for both individuals and companies worldwide.
