Stablecoins, unlike other crypto assets, aim to maintain a fixed parity relative to a specific currency. Stablecoins
have commonality and differences with other crypto assets (“unbacked crypto assets”). Like unbacked crypto
assets, they are issued on distributed ledgers, typically blockchains. Unlike unbacked crypto assets, they are
generally issued and operated in a centralized manner by entities such as crypto firms or financial institutions,
which aim to maintain a fixed parity relative to a specific currency, and have backing assets. Indeed, stablecoin
issuers usually back the stablecoins in circulation 1:1 with short-term, liquid financial assets. The large majority
of currently existing stablecoins is denominated in United States dollars.
Stablecoins are currently mostly used for crypto trades, although they have the potential to be used in other
payment transactions. Stablecoin issuance has doubled over the past two years, driven by their use in crypto
trades—acting as a bridge between volatile unbacked crypto assets and fiat currencies—albeit with an
expansion in use cases to include cross-border payments. The future demand for stablecoins could arise from
other use cases—like use in domestic payments—building on greater incentives and confidence provided by
enabling legal and regulatory frameworks. Estimates on stablecoins’ future growth vary widely.
https://www.imf.org/-/media/files/publications/dp/2025/english/usea.pdfThey stay stable - until they don't (which could be because of a market crash, or because of fraud). They're also being used as a "camel's nose in the tent" by crypto boosters - "hey, you can trust this, it's pegged to the dollar, so it must be just as safe, so what's there to worry about for crypto in general?"
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