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What are stablecoins? USDT, USDC, reserves, rules and risks

What is a stablecoin? A stablecoin is a cryptocurrency designed to keep a stable value, usually one US dollar per token. The largest ones, USDT from Tether and USDC from Circle, are issued by companies that hold reserves in cash and short-term government debt and promise to redeem each token for one dollar. On 27 October 2026 stablecoins in circulation were worth about 300 billion dollars, according to DefiLlama.

Key takeaways

Why stablecoins exist

Bitcoin and other cryptocurrencies change price constantly, which makes them impractical for paying, saving for a short time or keeping track of value. Stablecoins solve this by tracking a traditional currency while moving on a blockchain: they can be sent anywhere in minutes, at any hour, and used in crypto applications.

They have become the main currency of the crypto market. Traders park money in stablecoins between trades, companies use them for cross-border payments, and in countries with high inflation people use them to hold dollars. According to DefiLlama, the total in circulation was about 300 billion dollars on 27 October 2026. Stablecoin Beat reported an all-time high of about 322 billion dollars in May 2026.

The main stablecoins

Market data from DefiLlama on 27 October 2026, rounded:

How they keep their value

There are three main models. Fiat-backed stablecoins, like USDT and USDC, hold one dollar of reserves for every token: cash, bank deposits, short-term US Treasury bills and repurchase agreements. Authorized customers can send dollars to the issuer to create new tokens, or return tokens to get dollars back. Because this conversion is always possible, traders who see a token at 0.99 or 1.01 dollars buy or sell it until the price returns to one dollar.

Crypto-backed stablecoins, such as DAI, are created by depositing more crypto than the value of the stablecoins issued, for example 150 dollars of ETH for 100 dollars of stablecoins. If the collateral loses value, smart contracts sell it automatically to protect the peg.

Synthetic stablecoins use trading positions, for example holding crypto and selling futures on it at the same time, to keep a value close to one dollar. Algorithmic stablecoins without real reserves have the weakest record: TerraUSD lost its peg in May 2022 and collapsed within days.

Reserves and transparency

Circle states that most USDC reserves are held in the Circle Reserve Fund, a government money market fund registered with the SEC and managed by BlackRock, and the rest in cash at large banks. It publishes monthly reports reviewed by a Big Four accounting firm; its transparency page was updated on 26 October 2026.

Tether publishes quarterly attestations prepared by an independent accounting firm. For the first quarter of 2026 it reported a record reserve buffer of 8.2 billion dollars above the tokens in circulation and about 141 billion dollars of direct and indirect exposure to US Treasuries, according to The Block. Its reserves also include gold, bitcoin and secured loans. An attestation is a snapshot at one date, not a full audit.

The rules: MiCA in Europe

The EU regulation on markets in crypto-assets, Regulation (EU) 2023/1114 known as MiCA, applies its stablecoin rules from 30 June 2024 and its rules for crypto service providers from 30 December 2024. Stablecoins tied to one currency are called e-money tokens; their issuers must be authorized as a bank or an electronic money institution, keep reserves separate and redeem tokens at par value at any time, without fees.

The transition period for existing service providers ended on 1 July 2026. Tether has not sought authorization under MiCA, so major exchanges serving customers in the European Economic Area restricted or removed USDT trading for those customers. USDC and EURC are authorized. Holding USDT in a personal wallet is not prohibited; the rules concern offering and trading it through regulated platforms.

The rules: the GENIUS Act in the United States

The GENIUS Act, the first US federal law on payment stablecoins, was signed on 18 July 2025. It allows only approved issuers to issue payment stablecoins in the United States, requires reserves of at least one dollar for every token in cash, bank deposits, Treasury bills with maturities of up to 93 days, repurchase agreements or government money market funds, requires monthly public reports on reserves and gives token holders priority over other creditors if an issuer fails.

Regulators are writing the detailed rules. The Office of the Comptroller of the Currency published its final rule in October 2026, covering reserves, redemption, risk management, custody and capital, with effect from 18 January 2027, according to Payment Expert. Rules on anti-money laundering and sanctions are handled separately by the Treasury.

Risks

Stablecoins and the Club

Stablecoins are a practical way to move dollars on a blockchain. Unicorn Club, the members-only club for accredited investors, accepts USDT and USDC on Ethereum (ERC-20), as well as BTC and ETH, for its pre-IPO club deals. Tokens on other networks, such as USDT on Tron, are different tokens; the guide on how to invest in pre-IPO companies with crypto explains the steps.

Frequently asked questions

Is a stablecoin the same as a dollar in the bank?

No. It is a claim on a private issuer backed by its reserves. Under the GENIUS Act payment stablecoins are not covered by deposit insurance.

What is the difference between USDT and USDC?

They are issued by different companies with different reserves and disclosures. USDC is authorized under MiCA in the EU; USDT is the larger one and is widely used outside Europe.

Do stablecoins pay interest?

The GENIUS Act and MiCA prohibit issuers from paying interest to holders. Some platforms offer rewards, which carry the risks of those platforms.

Why does the network matter?

The same stablecoin exists on several blockchains, such as Ethereum (ERC-20) and Tron (TRC-20). Sending tokens on a network the recipient does not support can make them hard to recover.

Can I still hold USDT in Europe?

Holding it in a personal wallet is allowed, but regulated platforms serving EU customers have restricted trading because Tether is not authorized under MiCA.

Related guide

Sources

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