Are you interested in stablecoins but find the world of cryptocurrency daunting? You’re not alone. Digital currencies can be complex, especially for those new to the space. This comprehensive guideAre you interested in stablecoins but find the world of cryptocurrency daunting? You’re not alone. Digital currencies can be complex, especially for those new to the space. This comprehensive guide

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What is a Stablecoin? A Complete Beginner’s Guide to Stable Cryptocurrencies

Author: MEXC

Jan 24, 2026MEXC

STABLE$0.020757+8.76%

Are you interested in stablecoins but find the world of cryptocurrency daunting? You’re not alone. Digital currencies can be complex, especially for those new to the space. This comprehensive guide offers a clear and accessible introduction to stablecoins, explaining what they are, how they work, and the different types available. You’ll also learn practical tips for using them securely. Whether your goal is to protect assets from market volatility, send funds internationally, or simply expand your understanding of digital currencies, this guide provides the essential knowledge you need to navigate the stablecoin landscape with confidence.

Key Takeaways
Stablecoins are cryptocurrencies pegged to assets like the US dollar, gold, or other reserves, aiming to maintain a stable value while enabling blockchain-based transactions.
The stablecoin market reached $235 billion in 2025.
Main categories include fiat-backed (USDT, USDC), commodity-backed (PAXG), crypto-backed (DAI), and algorithmic stablecoins.
Tether (USDT), USD Coin (USDC), Binance USD (BUSD), DAI, PayPal USD (PYUSD), Ripple’s RLUSD, and euro-pegged stablecoins in Europe.
Benefits include reduced price volatility, cheaper cross-border transfers, financial inclusion, DeFi integration, and inflation protection.
Though users should be cautious about regulatory uncertainty, lack of reserve transparency, loss of peg, and centralization concerns.
Using Stablecoins on MEXC: Create an account, select your stablecoin and network, generate a wallet address, and verify network compatibility to avoid loss of funds.
The US is advancing stablecoin bills like the STABLE Act and GENIUS Act; the EU has adopted MiCA regulations.

What is a Stablecoin?

What is a stablecoin? A stablecoin is a type of cryptocurrency designed to maintain a steady value by being pegged, or linked, to reserve assets such as government-issued currencies (e.g., the US dollar), commodities (e.g., gold), or other financial assets. Unlike more volatile cryptocurrencies like bitcoin, ether, or altcoins, stablecoins aim to combine the advantages of blockchain technology, including fast transactions, strong security, and borderless transfers, with reduced price fluctuations, making them more practical for everyday use. The global stablecoin market has grown rapidly, reaching USD 235 billion in 2025, up from USD 152 billion the year before. This surge reflects their increasing role in the cryptocurrency ecosystem and their potential to connect traditional finance with decentralized finance (DeFi) solutions.

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Types of Stablecoins

Stablecoins use different mechanisms to keep their value stable. Knowing the differences can help you choose the type that best fits your needs.

Fiat-Collateralized Stablecoins

Backed by traditional currencies like the US dollar, these stablecoins hold reserves at a 1:1 ratio, meaning each token is fully redeemable for one unit of the currency. Reserves are held by regulated custodians and often audited for transparency.

Examples: Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Pax Dollar (USDP), and PayPal USD (PYUSD)

Commodity-Backed Stablecoins

Pegged to the value of physical assets such as gold, silver, or oil. These tokens track commodity market prices and may be redeemable for the asset itself, though redemption can be more complex than with fiat-backed stablecoins.

Examples: Tether Gold (XAUt), Pax Gold (PAXG)

Crypto-Collateralized Stablecoins

Secured by other cryptocurrencies. To offset crypto volatility, they are typically over-collateralized, e.g., holding USD 2 worth of Ethereum for each USD 1 issued in stablecoins. This helps maintain the peg even if collateral values drop.

Examples: Dai (DAI), which is backed by cryptocurrencies like Ethereum through the MakerDAO protocol

Algorithmic Stablecoins

Algorithmic stablecoins don’t rely on collateral. Instead, they use algorithms to control the supply of the cryptocurrency based on demand. When the price rises above the target value, the algorithm increases the supply to bring the price down. Conversely, when the price falls, the supply is reduced.

Examples: Frax (FRAX), which combines collateralization with algorithmic adjustments

Most Popular Stablecoins

A few major stablecoins dominate the market, each with a distinct approach to maintaining price stability and transparency.

Tether (USDT)

Tether is the largest stablecoin by market capitalization, valued at over 165 billion USD as of 2025. Launched in 2014, USDT is pegged to the US dollar and operates across major blockchains such as Ethereum, Solana, and Tron. Tether has faced scrutiny over its reserve disclosures—in 2021, the US Commodity Futures Trading Commission fined Tether Limited USD 41 million for misleading reserve statements. Despite these controversies, USDT remains the dominant stablecoin globally, especially in Asia and Europe, and is widely used for trading, remittances, and liquidity in crypto markets.

USD Coin (USDC)

USDC is the second-largest stablecoin, with a market capitalization of over $58 billion. Issued by Circle, USDC emphasizes transparency and regulatory compliance. Its reserves are held in cash and short-duration US government treasuries, with weekly attestations published to verify these reserves.

When was the first USDC stablecoin issued by Circle? Circle launched USDC in September 2018 in collaboration with Coinbase as part of the Centre Consortium. It was created as a transparent alternative in the stablecoin market at a time when concerns about Tether’s reserves were growing. Since its launch, USDC has grown to become one of the most trusted and widely used stablecoins in the ecosystem.

USDC has gained significant popularity in North America and is widely used in decentralized finance (DeFi) applications due to its perceived stability and transparency.

Binance USD (BUSD)

BUSD is a stablecoin issued by Paxos in partnership with Binance, one of the world’s largest cryptocurrency exchanges. Like USDT and USDC, BUSD is pegged to the US dollar and backed by reserves of US dollars and US Treasury bills.

DAI

Unlike the centralized stablecoins mentioned above, DAI is a decentralized stablecoin created through the MakerDAO protocol. DAI maintains its peg to the US dollar through a system of smart contracts and over-collateralization with other cryptocurrencies, primarily Ethereum. This makes DAI more resistant to regulatory pressures but potentially more complex for new users to understand.

PayPal USD (PYUSD)

Launched by PayPal in collaboration with Paxos, PYUSD represents traditional financial institutions’ entry into the stablecoin market. It’s designed specifically for payments and is backed by reserves managed by Paxos, with regular transparency reports available to the public.

Ripple USD (RLUSD)

RLUSD is the recently launched stablecoin from Ripple, the company behind the XRP Ledger. Announced in 2025, the RLUSD stablecoin has generated significant interest in the cryptocurrency community, with high bids reflecting market enthusiasm prior to its official launch. Designed for cross-border payments and institutional use, RLUSD is pegged to the US dollar and utilizes Ripple’s payment infrastructure to facilitate fast, low-cost international transfers.

It’s important to note that while Ripple has developed the XRP cryptocurrency and now the RLUSD stablecoin, XRP itself is not a stablecoin. XRP is a separate digital asset used primarily for liquidity in cross-border transactions, while RLUSD is specifically designed as a dollar-pegged stablecoin. This distinction is critical for investors and users to understand when navigating Ripple’s ecosystem of products.

Euro Stablecoins

While USD-pegged stablecoins dominate the market, several euro stablecoins have emerged to serve the European market and users worldwide who prefer euro-denominated digital assets. Notable examples include:

EURT (Tether Euro): A euro-pegged stablecoin issued by Tether
EURC (Circle’s Euro Coin): A euro stablecoin from the issuer of USDC
EURS (Stasis Euro): One of the earliest euro stablecoins, backed by euro reserves
EUROC (Euro Coin): A regulated euro stablecoin gaining adoption in European markets

Euro stablecoins serve similar functions to their USD counterparts but are particularly valuable for European businesses and individuals looking to avoid currency conversion costs when transacting in their local currency.

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How Stablecoins Maintain Their Value

The ability of stablecoins to maintain a stable value relies on different mechanisms, depending on the type of stablecoin.

Reserve Assets

Fiat-collateralized stablecoins maintain their value through reserves of the underlying asset. For every stablecoin in circulation, the issuing company should hold an equivalent amount of the backing asset in reserve. These reserves are typically held in bank accounts, Treasury bills, or other low-risk investments.

Pegging Mechanisms

The most common pegging mechanism is the 1:1 ratio with a fiat currency, typically the US dollar. This means one stablecoin is always worth one dollar. Other stablecoins might be pegged to different currencies like the euro (EURC) or a commodity like gold.

Maintaining Stability

To ensure stablecoins maintain their peg, issuers employ various methods:

Minting and Redemption: Users can mint new stablecoins by depositing the equivalent value in the backing asset, or redeem their stablecoins for the underlying asset.
Arbitrage: If a stablecoin’s market price deviates from its peg, arbitrageurs can profit by buying the stablecoin when it’s below the peg and redeeming it for the backing asset, or selling it when it’s above the peg. This market mechanism helps maintain the peg.
Over-collateralization: For crypto-backed stablecoins like DAI, the system requires users to deposit more value in cryptocurrency than the value of stablecoins they receive. This acts as a buffer against price volatility.
Algorithmic Supply Adjustments: Algorithmic stablecoins use smart contracts to automatically adjust the supply based on demand, theoretically maintaining the peg through market forces rather than collateral.

Transparency and Audits

Many stablecoin issuers publish regular attestations or “proof of reserves” to verify that they hold sufficient backing assets. These reports, often conducted by third-party accounting firms, help build trust in the stablecoin ecosystem.

Benefits of Stablecoins

Stablecoins offer several advantages over both traditional financial systems and volatile cryptocurrencies, making them increasingly popular for various use cases.

Price Stability in Volatile Markets

The primary benefit of stablecoins is their price stability relative to volatile cryptocurrencies. During market downturns, crypto traders can quickly convert their assets to stablecoins to preserve value without exiting the crypto ecosystem entirely.

Cross-Border Transactions and Remittances

Stablecoins enable faster and cheaper international transfers compared to traditional banking systems. This is particularly valuable for remittances, where traditional methods often involve high fees and slow processing times. For example, sending a $200 remittance from Sub-Saharan Africa is about 60% cheaper using stablecoins compared to traditional fiat-based remittance methods.

Financial Inclusion

In regions with limited access to banking services or unstable local currencies, stablecoins provide a way for individuals to participate in the global economy. By offering a stable store of value accessible via smartphone, stablecoins can serve the unbanked and underbanked populations worldwide.

DeFi Applications

Stablecoins are the backbone of many decentralized finance (DeFi) protocols. They facilitate lending, borrowing, and yield farming without the volatility risks associated with other cryptocurrencies. Their stability makes them ideal for liquidity pools on decentralized exchanges.

Bridge Applications

Bridge stablecoins represent an innovative category designed specifically to facilitate transfers between different blockchains. Platforms like Bridge (recently acquired by Stripe for $1.1 billion) specialize in creating interoperable stablecoin infrastructure that allows for seamless movement of stablecoins across various blockchain networks. This cross-chain functionality is critical for the broader crypto ecosystem, enabling users to leverage the strengths of different networks without being confined to a single blockchain’s limitations.

Protection Against Inflation

In countries experiencing high inflation, stablecoins pegged to more stable currencies like the US dollar provide a way for residents to protect their savings from local currency devaluation. This has contributed to high stablecoin adoption in countries like Argentina, Turkey, and Venezuela.

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Risks and Challenges

While stablecoins offer significant benefits, they also present important risks that users should understand.

Regulatory Concerns

As stablecoins grow in market share, they face increasing global regulatory scrutiny. Governments are drafting frameworks to address potential impacts on financial stability, monetary policy, and consumer protection.

United States: Proposed bills in Congress aim to set standards for reserve backing and transparency.
European Union: The Markets in Crypto-Assets Regulation (MiCA) bans algorithmic stablecoins and imposes strict reserve rules.

Reserve Transparency Issues

The credibility of a stablecoin depends on whether its reserves truly back its value. Some issuers, such as Circle (USDC), provide regular independent attestations, while others have been criticized for lack of openness. In 2021, Tether (USDT) was fined USD 41 million by the CFTC for misleading statements about its reserves. Limited transparency can erode trust and put users’ funds at risk.

De-pegging Risks

Stablecoins can lose their peg to the asset they track. The most notable example is the TerraUSD (UST) collapse in May 2022, which erased roughly USD 45 billion in value in a week, exposing vulnerabilities in algorithmic models. Even fiat-backed stablecoins may briefly lose parity during market stress or if doubts arise about issuer solvency.

Security and Centralization Risks

Most large stablecoins are issued by centralized organizations, creating single points of failure and counterparty risk. Users must trust the issuer to safeguard reserves and honor redemptions. Centralized issuers can also freeze or blacklist addresses, which runs counter to the open-access ethos of cryptocurrencies.

Uses of Stablecoins

Stablecoins are used across both retail and institutional finance, offering solutions from everyday purchases to complex investment strategies.

Trading and Investing

Stablecoins act as a key trading pair on cryptocurrency exchanges, allowing users to shift between assets without converting to fiat currency. This minimizes transaction costs and delays while providing a stable benchmark for valuing other cryptocurrencies.

For investors, stablecoins offer a way to hold funds during volatile market conditions without leaving the crypto ecosystem, enabling rapid re-entry into positions when market opportunities arise.

Payments and Commerce

Because stablecoins maintain consistent value, they are well-suited for everyday transactions. Unlike volatile assets such as Bitcoin, they minimize the risk of value changes during settlement.

Businesses can accept stablecoin payments knowing the amount received will retain its value, while consumers can spend without exposure to sudden price movements. Platforms like BitPay and Coinbase Commerce make stablecoin acceptance simple for merchants worldwide.

Remittances and International Transfers

Traditional cross-border payments through banks or money transfer operators can be expensive and slow, often taking days to settle and charging fees of 5-7% or more. Stablecoins enable near-instant international transfers at a fraction of the cost.

This application is particularly valuable in corridors serving migrant workers sending money home, where traditional remittance costs can significantly eat into the amount received by families.

Store of Value in High-Inflation Regions

In countries experiencing high inflation or currency controls, stablecoins provide a way for residents to preserve their purchasing power. By converting local currency to USD-pegged stablecoins, individuals can protect their savings from devaluation without needing access to physical dollars or foreign bank accounts.

Stablecoins often trade at a premium in these markets, reflecting the high demand for dollar exposure in economically unstable regions.

DeFi Applications

Stablecoins are fundamental to decentralized finance ecosystems, enabling:

Lending and borrowing: Platforms like Aave and Compound allow users to lend stablecoins and earn interest or borrow against crypto collateral
Liquidity provision: Stablecoins form half of many popular trading pairs on decentralized exchanges
Yield farming: Users can earn returns by providing stablecoin liquidity to various protocols
Synthetic assets: Stablecoins serve as collateral for creating synthetic versions of stocks, commodities, and other assets

Stablecoin Regulations

The regulatory landscape for stablecoins continues to evolve as governments and financial authorities recognize their growing importance in the financial system.

Current Regulatory Landscape

Stablecoin regulation varies significantly by jurisdiction, with some countries embracing them under clear frameworks while others take a more cautious approach. Major regulatory concerns include:

Financial stability risks
Consumer and investor protection
Anti-money laundering and counter-terrorism financing (AML/CFT)
Monetary policy implications
Banking system disruption

Regional Regulatory Approaches

United States

In the United States, both the House and Senate have advanced stablecoin bills in 2025. The STABLE Act and GENIUS Act aim to establish frameworks for stablecoin issuers, including reserve requirements, transparency standards, and oversight mechanisms.

The SEC issued a statement in April 2025 indicating that certain “Covered Stablecoins” that maintain adequate reserves and redemption rights might not be considered securities under certain conditions.

European Union

The European Union has implemented the Markets in Crypto Assets Regulation (MiCA), which took effect in 2023. MiCA effectively bans algorithmic stablecoins and requires all others to have assets held in custody by a third party. Reserves must be liquid and maintain a 1:1 ratio of assets to coins.

Singapore

The Monetary Authority of Singapore (MAS) has finalized a regulatory framework for single-currency stablecoins (SCS) pegged to the Singapore Dollar or any G10 currency. The framework focuses on value stability, capital adequacy, redemptions, and disclosures.

Hong Kong

Hong Kong has developed a regulatory framework for stablecoin issuers and launched a sandbox enabling industry stakeholders to develop and test their business models under regulatory supervision.

Future Outlook for Regulation

The trajectory of stablecoin regulation appears to be moving toward:

Bank-like regulation for stablecoin issuers, potentially including capital requirements, reserve standards, and regular audits
Greater transparency requirements regarding reserve composition and management
Consumer protection measures, including redemption rights and disclosure requirements
Integration with existing financial systems through licensing and oversight frameworks

In the United States, momentum around stablecoin regulation has increased with the current administration expressing support for legislation that would legitimize the asset class while preserving the dominance of the US dollar in global financial systems.

How to Buy and Use Stablecoins

Getting started with stablecoins is straightforward, even for beginners. Here’s a detailed guide to help you buy and use stablecoins effectively through MEXC.

Where to Buy Stablecoins

Stablecoins are available on trusted cryptocurrency exchanges like MEXC. The platform offers popular stablecoins such as USDT and USDC across multiple blockchain networks, giving you flexibility in your transactions.

How to Get Stablecoins on MEXC (Buy or Deposit)

Option A — Buy directly on MEXC (fiat on-ramp)

Create an account & KYC Sign up on mexc.com or the mobile app and complete KYC verification as per local laws.
Buy Crypto Go to Buy Crypto and choose your method (Card, Bank Transfer, or P2P).
Select a stablecoin Choose USDT or USDC (or another stablecoin), enter the amount, and complete payment.
Check your balance Go to Wallets → Spot to confirm the stablecoin has arrived.

Option B — Deposit from another wallet/exchange

Create an account & KYC (as required by local legislations)
Open your deposit page Wallets → Spot → Deposit (web or app).
Choose the coin and network Select USDT or USDC, then pick the correct network (e.g., ERC20, TRC20, SOL). Important: The sending platform must use the same network you select here.
Generate an address Click Generate Address (if needed). Copy it or scan the QR code.
Send and wait for confirmations Transfer from your external wallet/exchange. The deposit credits after blockchain confirmations (time varies by network).
Verify receipt Your deposit will be credited after blockchain confirmation, which varies by network

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Stablecoin Storage Options

For enhanced security, consider transferring your stablecoins from the exchange to a self-custodial wallet. Options include hardware wallets (highest security), software wallets, and mobile wallets. When choosing a wallet, ensure it supports the blockchain network of your stablecoin.

Important Considerations

Verify network compatibility: Always ensure the sending and receiving platforms use the same network
Check minimum deposit requirements: Some stablecoins have minimum deposit amounts
Be aware of MEMO requirements: Certain tokens (like EOS) require both an address and MEMO – failing to include both will result in lost funds
Confirm contract addresses: Verify that the asset contract address matches what MEXC supports
Consider network fees: Different blockchains have varying transaction fees
Keep records: Maintain documentation of all transactions for tax and personal accounting

This approach provides clear, step-by-step instructions specifically tailored to using MEXC for stablecoin transactions, with important warnings about common pitfalls that could result in lost funds.

Conclusion

Stablecoins bridge blockchain technology and traditional finance, offering blockchain’s benefits with price stability. Their $235 billion market reflects growing importance in both crypto and traditional finance systems. Major institutions like PayPal, Bank of America, and Stripe are entering this space while governments develop regulatory frameworks.

Going forward, stablecoins will likely see increased regulation, greater integration with traditional financial systems, innovation in decentralized options, expanded use cases, and regional variants serving specific economic needs.

While challenges remain—including regulatory uncertainty, transparency concerns, and de-pegging risks—stablecoins have become essential to the digital economy. By staying informed about different types, benefits, risks, and regulations, users can maximize these versatile digital assets while minimizing potential downsides.

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