Stablecoins: How Cryptocurrencies With a Fixed Price Work

The short answer to what are stablecoins: they are cryptocurrencies whose price is pegged to an external asset, most often the US dollar. One coin costs about one dollar and barely moves in price. Below is how the peg works, which types exist and what risks a holder carries (as of July 2026).

_Last updated: August 4, 2026. Prepared and fact-checked by the EIDEX editorial team; the sources and the method are described at the end of the article._

How the Dollar Peg Works

Why a Separate Class of Coins Was Needed

The crypto market is volatile: the price of bitcoin can move ten percent in a day. For an investor that is an opportunity; for settlement it is an obstacle. Stablecoins closed that gap: they gave market participants a unit of account that does not jump, while remaining ordinary tokens on a blockchain — transferable in minutes and requiring no bank.

The first stablecoins appeared in 2014, and over a decade the segment grew from a technical instrument for exchanges into a standalone part of crypto infrastructure. Today the class accounts for about three quarters of all crypto trading volume, and settled an estimated $46 trillion in transfers during 2025 — more than twenty times PayPal's annual volume and approaching three times Visa's.

Reserves, Redemption and Arbitrage

Ordinary cryptocurrencies trade freely and the price is set by demand. Stablecoins are built differently: every issued coin has backing, or a mechanism that holds the value near a target. The principle is simple — the issuer promises to redeem the coin at par at any moment, and the market proceeds from that promise.

Backed stablecoins work through reserves. A company accepts dollars, issues an equivalent number of tokens and keeps the funds in cash and short-term government bonds. When a holder returns the coins to the issuer, the issuer redeems them and pays out dollars.

Worth noting separately: the issuer earns not on an issuance fee but on the interest from the reserves — clients' dollars are placed in bonds and the income stays with the company. Holders receive no interest, and that is a fundamental difference from a bank account.

The flows are large enough to be studied by central bankers rather than only by traders: the Bank for International Settlements has published research on how stablecoin flows affect Treasury bill yields, which is a reasonable measure of how far this instrument has travelled from the crypto niche.

Backing Is Not a Guarantee

The mechanism does not guarantee perfect equality. Stablecoins trade on exchanges, so their price fluctuates in a narrow corridor: heavy buying pushes it slightly above a dollar, selling pushes it below. The deviation is usually measured in tenths of a percent.

It is also worth separating backing from a guarantee. Reserves make stablecoins economically resilient, but legally the holder of a token is not a bank depositor: deposit insurance does not extend to such assets in any jurisdiction.

Arbitrage returns the price to normal. If stablecoins trade below par, traders buy them up and redeem them with the issuer at a profit, demand rises and the value levels out. That is why the ability to redeem matters more than the peg itself: without it a stable coin rests on trust alone.

Types of Stablecoins

The classification is built on the type of backing, and the risks the owner accepts follow from it.

Backed by Fiat Money

The most widespread category. The reserve consists of dollars, euros and short-term treasury obligations held by the issuer. The largest stablecoins on the market belong to this group. The pluses are simplicity and predictability; the minus is the need to trust a company and its reporting.

Fiat-backed coins hold the overwhelming share of the market. Their convenience is that the mechanics are clear without any knowledge of blockchains: as many dollars as arrived at the issuer, that many coins were issued. Verifying it is only possible through reports, which makes disclosure quality the key parameter. The nature of the reserves themselves is covered in the glossary entry on fiat currency — state money with no commodity backing.

Backed by Crypto Assets

Here the collateral is other cryptocurrencies locked in a smart contract. Because the collateral is volatile, its size exceeds the issuance — for example, a hundred dollars of coins against a hundred and fifty dollars of backing. If the market falls, the position is liquidated automatically.

It works like this: a user locks cryptocurrencies in a protocol and receives stablecoins in return; to get the collateral back, the debt is repaid. The peg is maintained by usage rates and by the liquidation mechanism.

Such coins are more transparent: the collateral is visible on the blockchain. The price of that transparency is complexity and dependence on the protocol working correctly.

Algorithmic

This group has no backing at all: balance is maintained by issuing and burning linked coins. The idea is elegant — the algorithm expands supply when the price rises and contracts it when the price falls, holding the coin at par with no reserves. History showed the weakness of the approach: the collapse of TerraUSD in 2022 destroyed tens of billions of dollars in a matter of days. Since then algorithmic stablecoins have held a marginal share of the market.

Backed by Commodities

A separate category is pegged not to a currency but to gold or another raw material. Such coins repeat the price of the metal, so they are stable only relative to it.

The Main Players on the Market

The segment's capitalization is close to $290 billion in the summer of 2026, having peaked above $320 billion in April, and it is distributed very unevenly: the top two issuers hold about 89% of the market between them.

Tether (USDT)

The largest asset in the category by turnover, at roughly $183 billion of supply and about 64% of the market. Issued since 2014, present on dozens of blockchains, dominant in transfers between venues and in P2P deals. The issuer publishes reports on the composition of its reserves, but for a long time did not pass a full audit by one of the big four firms — the main complaint of critics.

The dominance is explained by the network effect: the more venues accept these coins, the more convenient it is to hold exactly them. At the same time the asset's share is gradually declining as competitors win ground with stricter reporting. A practical price reference is always available on the USDT to RUB rate page.

USD Coin (USDC)

The second largest asset, issued by the company Circle, at about $72 billion of supply. It is positioned as a more regulated alternative: the reporting is more transparent and the issuer met the requirements of the European MiCA regulation earlier than its competitors. Because of that USDC is more popular among institutional participants. For a private user the difference shows elsewhere: the set of supported networks and venues differs between the two assets, and cashing Circle's coins out into rubles is sometimes harder because there are fewer ruble pairs with them.

DAI and Decentralized Analogues

This coin is issued by a protocol rather than a company: the backing is crypto assets in smart contracts. Such stablecoins are valued for independence from banking infrastructure, but their resilience depends on the quality of the collateral and the code. The volume of this group is noticeably smaller than that of centralized competitors, though anyone can verify the backing — the data sits in an open ledger.

Beyond the three named assets there are dozens of less known projects. The rule here is simple: the lower the trading volume, the higher the risk that at the moment you need it, the coin cannot be exchanged at par.

Where Stablecoins Are Used

The field of application moved beyond exchange trading long ago. For many users these coins have become the main working asset, with volatile cryptocurrencies only a part of the portfolio.

• Settlements and transfers. Sending stablecoins is cheaper and faster than making an international bank payment, especially on low-fee networks such as the TRC20 network.

• Holding a position. A trader exits a volatile asset not into rubles but into stablecoins: the funds stay on the exchange, ready for the next deal. Going back in also takes seconds, whereas a bank transfer would take a day.

• Business settlements. Companies use these coins in foreign trade operations where banking channels work slowly.

• Decentralized finance. In lending protocols such coins serve as the main borrowed asset and as collateral.

• Savings in currency terms. In countries with high inflation people use them as a way to hold funds in dollar terms without a currency account.

Stablecoins and Cashing Out to Rubles

In Russia these coins most often serve as an intermediate link: they are sold for rubles through an exchange, P2P or an exchange service. Most cryptocurrencies have fewer direct ruble pairs and thinner liquidity in them, so the route through a stablecoin usually turns out cheaper. How such deals are arranged and which costs are built into them is covered in the article on how to exchange cryptocurrency for rubles.

Risks to Remember

Price stability does not mean an absence of risk. There are several, and they are of different natures.

Issuer and Reserve Risk

The owner of a coin effectively holds a company's obligation. If the reserves turn out to be incomplete or illiquid, redemption becomes a problem. That makes the composition of the backing and the regularity of reports the first thing to look at. Large issuers publish the structure of their reserves monthly, and the difference between cash and riskier instruments in those reports is substantial.

Losing the Peg

A depeg is a situation where a coin loses its peg and trades noticeably below or above par. The causes vary: market panic, problems at the bank holding the reserves, an algorithm failure. The depth of the deviation depends on how quickly the issuer confirms its readiness to redeem at par. In March 2023 USDC briefly fell well below a dollar because of the failure of the bank holding part of its funds; the peg recovered after a regulator's decision. The conclusion is obvious: even backed coins depend on the infrastructure around them.

Freezes and Compliance

Centralized issuers are technically able to freeze an address, and they use that power at scale rather than in theory: Tether states that it works with more than 340 law enforcement agencies in 65 countries and has frozen more than $4.4 billion in assets. Such cases are tied to law enforcement requests, but they cannot be ruled out.

Mistakes in a Transfer

These coins exist on different networks, and sending in an unsupported format leads to a loss of access to the funds. Before a transfer the network is checked twice, and for a large amount a small test transfer is sent first.

Regulation in 2026

The attitude of states towards the segment has changed: from ignoring it to detailed rules.

The United States and Europe

In July 2025 the GENIUS Act was signed in the United States — the first federal law on this class of assets. It requires full backing with high-quality liquid assets, monthly reserve reporting, audit and a licence; paying interest to holders is forbidden to issuers. Implementation rules were due in July 2026.

In the European Union the MiCA regulation applies, with its own requirements for reserves and reporting; in Hong Kong issuers have had to obtain a licence from the local financial regulator since 2025. Issuers without a licence faced delisting on European venues, so the availability of specific coins in the EU differs.

The general direction is clear: regulators want these assets fully backed by liquid instruments, with licensed issuers publishing reports. For a user that is mostly a plus — there is more transparency. The flip side is that some coins leave particular markets, and the available set differs from country to country.

Russia

There is no separate law on this class of assets in the country. They fall under the general concept of digital currency: owning and trading is allowed, paying inside the country is not. The Finance Ministry is discussing separate regulation with a concept of foreign digital rights, but the status of the project is not final (as of July 2026). The tax side does not depend on the type of coin: a sale generates income. Rates and deadlines are collected in the article on taxes on cryptocurrency and mining.

What Is Happening to the Market

The segment grows faster than the rest of the crypto market, and the reason is utilitarian: this class of assets solves the problem of settlement rather than speculation. The bulk of transfers runs through a few large networks where the fee is measured in cents.

The concentration is easy to quantify. Ethereum holds about $170 billion in stablecoins, close to 60% of global supply; TRON is second with roughly $87 billion, of which more than 97% is a single coin; Solana holds about $16 billion and BNB Chain about $14 billion (DefiLlama data, April 2026). A user's practical conclusion follows from this: the cheap route and the widely supported route are not the same network.

The mix of participants is changing too. Such coins used to be used mainly by traders; now companies, payment services and ordinary users who need a dollar equivalent without a bank account have joined them. In parallel the number of regional projects pegged to other currencies is growing, from the euro to the dirham.

Forecasts of market size diverge widely, and they deserve caution: they depend on exactly how regulators allow banks to work with this class of assets.

How to Choose a Stablecoin

There is no universal answer, but there are parameters for comparison. The first is transparency of reserves: whether the issuer publishes reports and how often. The second is liquidity: how easily the coin can be exchanged on the venue you need. The third is network support: whether cheap transfer routes are available. The fourth is trading volume in the specific pair you need — it determines how close to par you will be able to sell when the moment comes.

Put in plain terms, the choice comes down to a balance between convenience and trust. The largest coins are accepted everywhere, but their issuers are centralized; decentralized analogues give independence at the cost of complexity.

Practice shows that many people hold two or three different assets of this class at once — that reduces dependence on a single issuer. An additional factor is availability on a specific venue: not all of them trade everywhere, and cashing some out into rubles is easier than others.

Keeping all your capital in one asset is risky regardless of its name. These coins are an instrument for settlement and temporary parking, not a replacement for a bank deposit: there is no insurance of funds here.

What We See in Practice

This article is written from the side of a platform that works with these assets every day, not from documentation. Before a coin or a network appears in our deposit and withdrawal forms we move funds through it ourselves, in both directions and in small amounts, and we repeat the check when a network changes its fee model.

What those runs show is that the choice of coin matters far less to a user than the choice of network. The price difference between two large dollar-pegged assets is fractions of a percent; the difference between a cheap and an expensive network on the same transfer is tens of times. The second choice is the one that shows up in the amount received.

The questions that reach support reflect the same asymmetry. They are almost never about which coin is more reliable; they are about a transfer sent in the wrong format, or about a coin that a receiving service does not support. That is why availability on the specific venue you plan to use is worth checking before the purchase rather than after it.

Stablecoins and Taxes

There is no separate tax regime for this class of assets. Legally they are the same digital currency, so a sale for rubles generates income that is declared by the taxpayer.

An important nuance: exchanging one cryptocurrency for another also counts as a disposal. Buying bitcoin with a stablecoin formally creates a tax base even if no rubles reached the account. The calculation is made at the market quote on the date of the deal.

The practical conclusion is to keep the history of operations. Platform statements and transfer confirmations will be needed to confirm expenses and avoid paying tax on the full proceeds.

How We Checked This Article

The market figures come from named trackers with dates attached: total capitalization and the shares of individual coins as of early August 2026, chain-level distribution from DefiLlama as of April 2026, transfer volumes from published industry estimates for 2025, and enforcement figures from Tether's own statements. The regulatory dates were checked against the texts of the relevant laws and regulations.

Each number carries the period it belongs to, because most of them move: supply changes daily, market shares shift, and implementation deadlines slip. Where a claim could not be traced to a named source with a date, we left it out rather than rounding it into place. The article is reviewed when the regulatory picture changes materially.

Key Takeaways

• Stablecoins are cryptocurrencies pegged to an external asset, most often the dollar; the peg holds through reserves and the ability to redeem at par, not through law.

• The segment is close to $290 billion and highly concentrated: USDT holds about 64% and USDC about 25%, with the top two at roughly 89% between them.

• The types differ by backing — fiat, crypto collateral, algorithmic and commodity — and the holder's risk follows directly from that choice.

• The real risks are the issuer, a depeg, freezes at law enforcement request, and transfer errors; deposit insurance does not apply anywhere.

• Regulation arrived in 2025–2026 through the GENIUS Act and MiCA; in Russia there is no separate law and the coins fall under digital currency rules.

_This article is for general information and is not financial, tax or investment advice. Figures are current as of the date above and change as markets and regulation move._