What is a stablecoin?

A stablecoin is a digital token meant to stay worth a set amount of an ordinary currency, usually one US dollar. A company creates the tokens when people pay it dollars, and many issuers promise to swap them back at that price on request. A 2021 US government report describes stablecoins as “designed to maintain a stable value relative to a national currency or other reference assets”.

Unlike bitcoin, a stablecoin depends on the company behind it. Issuers say they hold reserves to back their tokens, but the same report found no standards for what those reserves had to contain. If an issuer does not honour requests to swap tokens back, or people stop believing it can, it warned, “runs on the arrangement could occur”.

Some stablecoins now travel over Bitcoin. In January 2025 Tether said it would bring its dollar stablecoin, USDT, to Bitcoin and the Lightning NetworkLightning NetworkA network built on Bitcoin for payments through channels, without recording every payment as its own blockchain transaction. through Taproot AssetsTaproot AssetsA protocol from Lightning Labs for creating tokens, such as dollar stablecoins, on Bitcoin and sending them over the Lightning Network., a protocol built by Lightning Labs. “It all comes back to Bitcoin,” said Lightning Labs’ chief executive, Elizabeth Stark. Not every bitcoiner agrees: Frank Corva, a Bitcoin Magazine writer, called USDT on Bitcoin “a stain on the soul of Bitcoin”.