Cryptocurrency whose value is pegged to a reference asset, usually USD. Used as on/off-ramps between fiat and crypto. Reserve quality varies widely.
A stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency (USD most commonly, also EUR and SGD). The peg is maintained by holding collateral, algorithmic mechanisms, or both.
Major stablecoins: USDT (Tether), USDC (Circle), DAI (MakerDAO), BUSD (Binance, discontinued). Combined market cap: US$130 – 180 billion.
Fiat-backed: the issuer holds USD reserves equal to the stablecoin supply. USDC publishes monthly attestations; USDT publishes quarterly with less rigour. Reserve quality varies sharply.
Crypto-backed: collateralised by other cryptocurrencies, with over-collateralisation buffers (e.g., DAI is backed by 150%+ of crypto value). More transparent but more volatile.
Algorithmic: maintain peg via supply/demand algorithms without collateral. UST collapsed in May 2022 (S$60 billion lost), discrediting the model.
Crypto trading: stablecoins are the dollar substitute on crypto exchanges. Settle trades 24/7 without crossing into fiat.
Cross-border payments: USDT/USDC move globally in minutes, often cheaper than SWIFT for retail flows.
DeFi infrastructure: stablecoins are the lifeblood of decentralized lending, derivatives, and yield farming.
Inflation hedge in unstable economies: residents of Venezuela, Argentina, Turkey, Nigeria use stablecoins to escape local currency collapse.
Issuer credit risk: USDT has faced regulatory pressure over reserve transparency. A loss of confidence could break the peg.
Depeg events: USDC briefly traded at $0.87 in March 2023 due to Silicon Valley Bank exposure. Recovered within days but exposed the fragility.
Smart contract risk: DAI and other crypto-backed coins depend on smart contracts. Bugs or oracle failures can cause sudden devaluation.
Regulatory risk: MAS, the SEC, and major regulators are increasing oversight. Stablecoins may face stricter reserve, audit, and licensing requirements in coming years.
Singapore-licensed alternatives: XSGD (StraitsX SGD stablecoin) operates under MAS oversight. Limited use case compared to USD stablecoins but jurisdictionally cleaner.
A cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency (most often USD). Examples: USDT (Tether), USDC (Circle), DAI (MakerDAO). Used as the dollar substitute on crypto exchanges and as on/off ramps between fiat and crypto.
Fiat-backed (USDC, USDT) hold reserves of cash and short-term debt equal to circulating supply. Crypto-backed (DAI) are over-collateralised with other cryptocurrencies. Algorithmic stablecoins (UST, now defunct) used supply / demand mechanisms — and have a track record of failure.
Better than volatile crypto, but not as safe as fiat in a regulated bank. Issuer credit risk is real — USDC briefly depegged to $0.87 in March 2023 due to Silicon Valley Bank exposure. USDT has faced regulatory pressure over reserve transparency. Don't park life savings in stablecoins.
XSGD (issued by StraitsX) is a Singapore-dollar stablecoin operating under MAS oversight. Smaller circulation than USD stablecoins, but jurisdictionally cleaner for Singapore-based users wanting SGD-denominated on-chain exposure.