What are stablecoins?

By the Blockhorizon Editorial Team · Updated 2 October 2026 · How we check facts

Stablecoins are often described as the “safe” corner of crypto. This guide explains what they actually promise, who stands behind that promise, and what two central-bank bodies — the Bank for International Settlements (BIS) and the European Central Bank (ECB) — say can go wrong. Every figure below comes from those reports or from financial regulators, not from stablecoin issuers.

What is a stablecoin, in plain English?

Most crypto-assets, such as Bitcoin, have no fixed price: they are worth whatever buyers will pay at that moment. A stablecoin tries to be different. The BIS defines stablecoins as crypto tokens recorded on decentralised ledgers that “promise to always be worth a fixed amount in fiat currency” — for example, one dollar.

“Fiat currency” simply means ordinary government money, such as the US dollar, the euro or the pound. The fixed amount a stablecoin aims for is called its peg, and the price it is meant to hold is called par.

Like other crypto, stablecoins move on a blockchain and are held in a crypto wallet. The difference is the promise attached to them.

How do stablecoins try to keep a steady price?

According to the BIS, most stablecoins are “issued by a single, central entity”. That company issues new coins when people pay it, and says it holds a pool of reserve assets behind the coins in circulation. The promise of a steady price rests on that pool of reserves.

The BIS also points out how new coins come into existence: “any additional issuance requires full upfront payment by holders”. In other words, every new coin has to be paid for in full, up front, by the person who receives it.

So when you hold a stablecoin, you are relying on a private company: that it really holds the reserves it says it holds, and that it will swap your coins back at par when you ask.

Which stablecoins are the biggest?

The ECB’s Financial Stability Review of November 2025 says the combined market value of all stablecoins had reached an all-time high and “now exceeds USD 280 billion”.

Two coins dominate that market. The ECB puts Tether (USDT) at USD 184 billion, or 63% of the total, and USD Coin (USDC) at USD 75 billion, or 26%. Added together, that is USD 259 billion — roughly 89% of the market held by just two issuers.

Almost all of it is tied to the US dollar. The BIS says “over 99%” of stablecoins are US dollar-denominated, and the ECB says dollar coins make up around 99% of supply. By the ECB’s count, euro-denominated stablecoins total only around €395 million.

Naming these coins here is not a recommendation. Blockhorizon does not suggest buying or holding any stablecoin.

Is a stablecoin always worth exactly one dollar?

No. This is the most common misunderstanding. The BIS reports that “stablecoins of various stripes have seen substantial deviations from par” — meaning they have traded below (or above) the amount they promise to be worth.

The ECB explains how a stablecoin can lose its peg. If holders “lose confidence that they can be redeemed at par”, that loss of faith “can simultaneously trigger a run on a stablecoin and cause a de-pegging event”. A run is when many holders try to cash out at once; a de-peg is when the price breaks away from its fixed amount.

The word “stable” describes what the issuer is aiming for, not something anyone can promise you.

Are stablecoins the same as money in a bank?

No. A stablecoin is a claim on a private issuer and its reserves, not a bank deposit. The BIS tests whether something can serve as the mainstay of the monetary system against three criteria — singleness, elasticity and integrity — and concludes that stablecoins “perform poorly” on these tests.

On integrity, the BIS notes that stablecoins are attractive “for use by criminal and terrorist organisations”, because they are pseudonymous bearer instruments on public blockchains: whoever controls the token can move it, and owners are not named.

Protection is also limited. The UK Financial Conduct Authority (FCA) says it is “highly unlikely” you will be covered by the Financial Services Compensation Scheme for crypto losses. EU supervisors say that even under the EU’s MiCA rules “you will not benefit from compensation schemes”.

What are the risks of holding stablecoins?

Put the central-bank and regulator warnings together and the main risks are:

• De-pegging. The price can fall below par, especially if holders start to doubt the issuer (BIS, ECB).
• Issuer risk. Most stablecoins depend on one company and its reserves. The promise is only as good as those reserves (BIS).
• Concentration. Two issuers account for about 89% of the market, by ECB figures, so a problem at one would be felt widely.
• Little or no compensation. UK and EU authorities say you should not expect a compensation scheme to cover crypto losses (FCA, EU supervisors).
• Platform and key risk. Stablecoins sit on the same platforms and in the same wallets as other crypto. Lose your keys or use a platform that fails, and the coins can be lost. See our guide to crypto wallets and private keys.
• Scams. A coin that is meant to track the dollar can still be used in a scam like any other crypto. Learn the red flags of crypto scams.

The FCA’s general warning applies to stablecoins too: crypto-assets “are all high risk and speculative as an investment”, and if you invest you “should be prepared to lose all your money”.

Blockhorizon is an education site. Nothing here is a recommendation to buy, sell or hold any stablecoin or other crypto-asset.