# What Is a Stablecoin

Updated: September 5, 2026

> A stablecoin is a blockchain-based digital asset designed to hold a fixed value relative to another asset, most often the US dollar. How that value is held varies: full reserves in cash and short-term Treasury bills, over-collateralization with crypto assets, or models without direct backing. Unlike a CBDC, a stablecoin is a private issuer's liability, not a direct central-bank issuance.

## Definition

No single legal definition of a stablecoin exists — every jurisdiction frames it differently. The Financial Stability Board (FSB) describes a stablecoin as a cryptoasset that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets. The Bank for International Settlements (BIS), in its 2025 report, defines stablecoins as crypto tokens on decentralised ledgers that promise to always be worth a fixed amount in fiat currency — typically one dollar — most issued by a single central entity holding reserves that back the circulating token supply.

The US GENIUS Act (signed into law on July 18, 2025) defines a "payment stablecoin": a digital asset issued for payment or settlement that the issuer is obligated to redeem at a fixed monetary value, such as one dollar. The EU's MiCA regulation does not use the word "stablecoin" in its legal text at all; instead it defines two categories — e-money tokens (EMTs), referencing a single official currency and treated as electronic money redeemable at par, and asset-referenced tokens (ARTs), referencing a basket of currencies, commodities, or crypto assets.

## Why stablecoins exist

The main use cases are payments and settlement, collateral for trading and lending in DeFi, cross-border transfers, and dollar access in countries with unstable local currencies or limited banking access.

- Traditional remittance channels take days and charge 5–10% in fees; eight of the top ten remittance-receiving countries are emerging markets — stablecoins offer a near-instant, lower-cost cross-border alternative.
- BIS estimates that by 2026 about 99.4% of fiat-backed stablecoins were pegged to the US dollar; 2025 annual transaction volume was estimated at roughly $28 trillion — still under three weeks of US wholesale settlement volume.

## Stablecoin vs. a volatile crypto asset

Bitcoin, ether, and most other crypto assets have no target price — value is set freely by supply and demand. A stablecoin, by contrast, is designed to keep deviation from its target as small as possible; the mechanism that holds the price — issuance, redemption, reserves, or collateral — is covered in "How the Peg Mechanism Works."

## Stablecoin vs. a CBDC

A central bank digital currency (CBDC) is a direct liability of the central bank — a digital form of the sovereign currency itself. A stablecoin is a private issuer's liability, backed by its reserves or collateral, not a direct state issuance. BIS argues that stablecoins as a class fail the "singleness" test (par acceptance with no questions asked) and the "elasticity" test of money supply — properties that settlement in central bank money delivers.

## Market scale

Market trackers put total stablecoin market capitalization at roughly $301.7 billion on September 3, 2026, with USDT accounting for about 63% ($183.4 billion) and USDC for about 25.5% ($74.2 billion). BIS's 2026 report estimated total stablecoin supply at close to $320 billion at the end of May 2026 — up from about $27 billion at the end of 2020.

## Sources

- [FSB, final report on the regulation of global stablecoin arrangements (2023)](https://www.fsb.org/2023/07/high-level-recommendations-for-the-regulation-supervision-and-oversight-of-global-stablecoin-arrangements-final-report/)
- [BIS, Annual Economic Report 2025, Chapter III](https://www.bis.org/publ/arpdf/ar2025e3.htm)
- [BIS, Annual Economic Report 2026, Chapter III](https://www.bis.org/publ/arpdf/ar2026e3.htm)
- [GENIUS Act, official law text (P.L. 119-27)](https://www.govinfo.gov/app/details/PLAW-119publ27)
- [MiCA, official regulation text (EU) 2023/1114](https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023R1114)
- [IMF, "Stablecoins, Central Bank Digital Currencies, and Cross-Border Payments"](https://www.imf.org/en/news/articles/2019/05/13/sp051419-stablecoins-central-bank-digital-currencies-and-cross-border-payments)

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