Stablecoins now represent over $250 billion in market capitalisation and settle trillions of dollars annually. For advisers navigating client questions about digital assets, understanding this category has become essential—not because clients will invest directly in stablecoins, but because these tokens underpin the infrastructure where much crypto activity occurs.
A stablecoin is a cryptocurrency designed to maintain a constant value, typically pegged one-to-one to a fiat currency. The dominant examples—Tether (USDT) and USD Coin (USDC)—track the US dollar. Unlike Bitcoin or Ethereum, their value doesn’t fluctuate with market sentiment. Instead, issuers maintain reserves of cash, short-term government securities, and equivalent assets to back each token in circulation.
The distinction between major stablecoins matters. USDT, launched in 2014, holds the largest market share but has faced periodic questions about reserve transparency. USDC, launched in 2018 by Circle, publishes regular attestations of its reserve composition and operates under clearer regulatory frameworks in both the US and EU. For institutional users, this transparency difference often determines which stablecoin they prefer.
Stablecoins serve practical purposes that explain their growth. Cross-border payments represent a significant use case. Traditional wire transfers can take days and cost several percentage points. Stablecoin transfers settle in minutes at a fraction of the cost. The World Bank estimates expatriate workers sent over $650 billion in remittances in 2023, paying average fees of 6.65%. Stablecoins offer a cheaper alternative without the volatility of other cryptocurrencies.
Dollar accessibility drives adoption in emerging markets. In countries experiencing high inflation—Turkey, Nigeria, Argentina—citizens use stablecoins to access US dollars outside the banking system. Research shows stablecoins were the fastest-growing crypto category in Argentina during 2023, when monthly inflation exceeded 25%. This isn’t speculation; it’s practical currency substitution.
Within crypto markets, stablecoins function as a settlement layer. Traders use them to move funds between exchanges, exit volatile positions without cashing out to fiat, and participate in decentralised finance protocols. The correlation between stablecoin inflows to exchanges and subsequent price movements in assets like Bitcoin suggests they now function as a leading indicator of market liquidity.
Regulation is advancing. The EU’s Markets in Crypto-Assets (MiCA) framework now requires stablecoin issuers to maintain one-to-one reserve backing, ringfence reserves from other assets, and use regulated custodians. Circle received approval under MiCA in 2024. In the US, the GENIUS Act passed in 2025 establishes federal stablecoin regulation, requiring transparency around reserves and moving issuers toward regular auditing.
Risks exist. Stablecoins can lose their peg under stress—the 2022 collapse of algorithmic stablecoin UST demonstrated how quickly $18 billion in value can evaporate when the mechanism maintaining the peg fails. However, fiat-backed stablecoins like USDT and USDC have proven more resilient, maintaining their dollar peg through multiple market crises.
For advisers, the relevance is contextual. Clients won’t typically hold stablecoins as investments—there’s no capital appreciation by design. But understanding stablecoins helps explain how digital asset markets function, why transaction costs differ from traditional finance, and how blockchain infrastructure processes value at scale. When clients ask about crypto, stablecoins are often part of the answer even when they’re not the question.