What Is a Stablecoin? The Complete Guide to How They Work, Their Types, and Why They Matter

A stablecoin is a cryptocurrency designed to hold a stable value against a reference asset, almost always the US dollar, either by backing each token with reserves or by managing supply algorithmically. The total stablecoin market stood at around $300 billion at the end of October 2026, according to DefiLlama, with USDT leading at about $182 billion and a market share of around 61%, followed by USDC at about $72 billion. Still, “stable” is a design goal, not a guarantee: pegs can and do break, as TerraUSD showed in 2022.

This guide explains how stablecoins hold their peg, the four main types and their trade-offs, where institutions actually use them, the risks that have wiped out billions, and the regulatory frameworks reshaping the market in the United States, Europe, Asia-Pacific and Latin America. Stablecoins and payments sit at the heart of the Digital Money, Payments and Stablecoins track at MERGE Madrid, positioned as Europe's largest crypto and tech event, where more than 3,000 attendees and more than 200 speakers from over 40 countries compare how banks and regulators are building on them. The next edition, MERGE Madrid 2027, runs from 26 to 28 October.

What a stablecoin is, how MiCA classifies it and how it differs from a tokenized deposit or the digital euro are covered in depth in Modules 1 and 2 of MERGE Institute (taught in Spanish). Try a free class →

1. Stablecoins: Definition and Core Concept

What Makes a Stablecoin "Stable"?

A stablecoin is a crypto-asset engineered to maintain a consistent value relative to a reference, typically one unit of a national currency such as the US dollar or the euro. The "peg" is the heart of the design: where Bitcoin or Ether can move 10% to 20% in a single day, a stablecoin aims to trade at or near 1.00 of its reference at all times.

That stability is what makes the instrument useful. It lets traders hold value on-chain between positions, lets people send money across borders without currency swings mid-transfer, and lets merchants quote prices in a familiar unit. Without a stable unit of account, most of the on-chain economy, from exchanges to lending protocols, would be far harder to operate.

Why Stablecoins Were Created

The original problem was simple: moving in and out of volatile crypto-assets meant constantly cashing out to a bank account, which is slow and expensive. Stablecoins closed that gap by providing a dollar-denominated token that stays on-chain. They became the bridge between traditional finance and the digital-asset economy, allowing users to park value and transact without exiting to fiat each time. Tether launched USDT in 2014 to serve exactly this need, and the fiat-backed model it pioneered still dominates the market today.

2. A Brief History of Stablecoins

Origins and Early Milestones

The earliest attempts predate today's giants. BitUSD, launched on the BitShares blockchain in 2014, was one of the first crypto-collateralized stablecoin experiments. USDT also arrived in 2014 with the fiat-backed model, and adoption accelerated as exchanges took it up for trading pairs. In 2017, MakerDAO launched DAI, a decentralized, crypto-collateralized stablecoin governed on-chain. In 2018, Circle and Coinbase launched USDC, positioning it as a regulated alternative with regular attestations.

The Market Growth Story

The sector has grown from a niche trading tool into core financial infrastructure. The market has grown more than 40-fold since March 2020, when total supply was barely $6.8 billion. Catalysts include the DeFi expansion of 2020, the later rise in on-chain activity and growing use for cross-border payments. Today's scale is hard to ignore: stablecoins settled $7.2 trillion in February 2026, above the US ACH network, although that figure is gross on-chain volume that includes trading and exchange transfers, not just payments. Today USDT and USDC make up around 85% of the market, with competitors such as Sky Dollar (USDS), Ethena's USDe, DAI and PayPal's PYUSD rounding out the field.

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3. Types of Stablecoins Explained

Not all stablecoins hold their peg the same way. The four main categories differ sharply in how they are backed, how decentralized they are, and how they behave under stress.

Fiat-Backed Stablecoins

Fiat-backed stablecoins hold reserves in traditional assets, ideally one dollar in cash or cash equivalents for every token issued. Key examples are USDT (Tether), USDC (Circle), PYUSD (PayPal) and, in euros, EURC (Circle). USDC is backed 1:1 by cash and short-term US Treasury bills, held in segregated accounts and in the BlackRock-managed Circle Reserve Fund. In the EU, the MiCA regulation treats them as e-money tokens (EMTs): only authorized banks or e-money institutions can issue them, and USDT does not have that authorization.

The advantages are simplicity, deep liquidity, and familiarity for traditional finance. The disadvantages are centralization and counterparty risk: holders depend on the issuer honoring redemptions, on the custodian banks holding the reserves, and on the quality and transparency of those reserves. Reserve composition is not an abstract concern, as the 2023 banking episodes made clear.

Crypto-Backed Stablecoins

Crypto-backed stablecoins are secured by volatile crypto-assets, such as Ether, locked in smart contracts. Because the collateral itself can lose value, these systems are over-collateralized: a user might lock $150 or more in crypto to mint $100 of stablecoin. DAI and its successor USDS, both part of the Sky ecosystem (formerly MakerDAO), and LUSD (Liquity) are the best-known examples. A close relative is the synthetic dollar, such as Ethena's USDe, which is backed by crypto but holds its peg by shorting that same asset in derivatives.

If the collateral value falls toward the minimum ratio, the position is liquidated automatically to protect the peg. The appeal is decentralization, permissionless access, and on-chain transparency. The costs are capital inefficiency, direct exposure to crypto market crashes, and system complexity, including the smart contracts and price oracles the mechanism depends on.

Commodity-Backed Stablecoins

Commodity-backed stablecoins are pegged to real-world assets, most commonly gold. Pax Gold (PAXG) and Tether Gold (XAUT) each represent an amount of physical gold held in custody. These tokens give digital exposure to a commodity and can serve as an inflation hedge or a diversifier. The trade-offs are custody and storage complexity, insurance costs, and thinner liquidity than dollar-pegged tokens. Keep in mind that commodity prices themselves fluctuate, so these tokens are "stable" only relative to the commodity, not to a currency.

Algorithmic Stablecoins

Algorithmic stablecoins try to hold their peg with little or no conventional collateral, relying instead on software rules that expand supply when the price rises above the peg and contract it when the price falls below. Some are purely algorithmic; others have used a fractional-algorithmic model that combines partial collateral with algorithmic adjustment, as FRAX did in its early days, although it has been fully collateralized since 2023. Minting and burning aim to pull the price back to target through arbitrage incentives. This is the most experimental and, historically, the most dangerous category. The TerraUSD collapse, covered in Section 8, is the textbook case of how an uncollateralized design can fail catastrophically.

4. How Stablecoins Maintain Their Peg

Reserve-Backed Peg Mechanisms

For fiat-backed stablecoins, the peg rests on credible redemption. If users can reliably exchange one token for one dollar through the issuer, arbitrage keeps the market price at 1.00: when the token trades below a dollar, traders buy it cheaply and redeem it for full value; when it trades above, they mint new tokens and sell. Confidence in that redemption promise depends on transparency, which is why Circle publishes regular reserve attestations for USDC and holds reserves in short-dated Treasuries and a dedicated reserve fund.

Algorithmic and Hybrid Peg Mechanisms

Algorithmic designs replace reserves with incentives. Seigniorage-style models mint new tokens when the price is above the peg and burn them when it is below. Dual-token models pair the stablecoin with a volatile “sister” token that absorbs volatility, as LUNA was meant to do for UST. Fractional-algorithmic models hold partial collateral and rely on algorithmic adjustment for the rest, although the best-known example, FRAX, eventually abandoned that design. The common weak point is reflexivity: when confidence falls, the backing asset can collapse exactly when it is needed most.

What "De-pegging" Means and Why It Happens

De-pegging is a sustained deviation of the price from its target, usually $1.00. Triggers include bank-run dynamics, reserve losses, market panic, regulatory action, and smart-contract exploits. Even well-collateralized tokens are not immune. USDC has depegged once: on 10-12 March 2023, USDC traded as low as $0.87 on Coinbase and Curve after Circle disclosed that $3.3 billion of its cash reserves, about 8% of the total, were stuck at Silicon Valley Bank during the bank's FDIC receivership; the peg restored within 72 hours once the FDIC guaranteed all SVB deposits on 12 March. The episode shows that a fiat-backed token is only as sound as its banking partners.

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5. Stablecoin Use Cases and Real-World Applications

Trading and Crypto Market Infrastructure

The original use case remains central. Traders use stablecoins as a safe haven during volatility, parking value without cashing out to a bank. Dollar-pegged tokens are the base of most exchange trading pairs, such as BTC/USDT and ETH/USDC, providing the liquidity layer that markets depend on, and they cut the friction and fees of constantly moving between crypto and fiat.

Cross-Border Payments and Remittances

Traditional international transfers are slow and expensive: they usually take several business days and cost around 6% of the amount sent on average, and more than 7% in some countries, because each payment passes through correspondent banks and clearing houses. Stablecoin transfers can settle in minutes for a fraction of a cent in network fees, which is why more workers use tokens such as USDC on low-cost networks to send money home. The US-Mexico and US-Philippines corridors and intra-African flows are where this shows most, and issuers such as Circle already convert payments received via SPEI in Mexico or Pix in Brazil into USDC automatically. Settlement data confirms it: stablecoins already move trillions of dollars a month, a gross volume that in early 2026 overtook one of the main US payment networks.

DeFi: Lending, Borrowing, and Yield Farming

In decentralized finance, stablecoins are the liquidity layer. They serve as collateral for loans, as deposits that earn interest on lending protocols such as Aave and Compound, and as the assets in stablecoin-to-stablecoin pools on automated market makers such as Curve. Because the units are stable, they make pricing, lending, and liquidity provision far more predictable than volatile crypto-assets would.

Currency Substitution and Financial Inclusion

In high-inflation economies, people use dollar-pegged stablecoins as a store of value, holding "digital dollars" without a US bank account. For unbanked populations, a smartphone and a wallet can provide access to dollar-denominated savings that the local banking system does not offer. Humanitarian organizations have also trialed stablecoin disbursements to deliver aid faster and with lower overhead in difficult contexts. The scale of individual adoption is significant: research cited in 2026 pointed to more than 232 million stablecoin holders worldwide.

Payments, Commerce, and Payroll

Merchants are starting to accept stablecoins for e-commerce, often at lower cost than card networks, and businesses use them to pay remote contractors across countries without the multi-day delays of bank transfers. PayPal's launch of PYUSD was an early signal of mainstream payments interest, and today Stripe, which bought the stablecoin platform Bridge, and Visa, which settles in stablecoins at a run rate above $25 billion a year, have brought the model into traditional payments infrastructure. Note that adoption is still uneven, and the regulatory treatment of stablecoin payments varies by jurisdiction.

6. Stablecoins in the DeFi Ecosystem

The Role of Stablecoins as DeFi's Backbone

Decentralized finance needs a stable unit of account to function. Without it, lending rates, collateral values, and liquidity pools would swing with crypto volatility. Stablecoins provide that anchor, which is why they consistently account for a large share of value locked across DeFi protocols and underpin most lending and liquidity-mining activity.

Decentralized vs. Centralized Stablecoins in DeFi

There is a tension at the heart of DeFi's reliance on stablecoins. USDC and USDT are the most liquid, but they are issued by centralized companies that can freeze addresses, which introduces central points of control into supposedly trustless systems. DAI and LUSD are preferred by those who prioritize decentralization. Protocols have also launched their own native stablecoins, such as Curve's crvUSD and Aave's GHO, to reduce dependence on external issuers.

Stablecoin Yield Opportunities

Yield on stablecoins comes from real borrowing demand and liquidity incentives. Lending protocols pay depositors interest funded by borrowers; liquidity pools pay trading fees plus token rewards; and yield aggregators such as Yearn automate movement between strategies. Returns vary with market conditions and are never risk-free: smart-contract bugs, protocol insolvency, and impermanent loss can all erode or erase gains. Any yield figure you see is variable and conditional, not a promise. For a reminder on how investment risk applies to crypto-assets, see the risk notice.

7. Key Risks and Stability Concerns

De-Pegging Risk

A stablecoin can lose its peg quickly, sometimes within hours. The USDC episode of March 2023 shows how fear about banking exposure can push even a well-collateralized token sharply below a dollar before confidence returns.

Reserve and Counterparty Risk (Fiat-Backed)

For fiat-backed tokens, the key question is whether the reserves actually exist, sit in the right assets and are accessible. Tether has faced scrutiny for years over the historical opacity of its reserves. Attestations, which are point-in-time reviews, are weaker than full audits. And as SVB showed, the strength of custodian banks matters: if a reserve bank fails or freezes assets, the peg is at risk even when the issuer is solvent. That is why regulation now sets minimums: under MiCA, the issuer must hold at least 30% of reserves as bank deposits and holders can redeem at par at any time and free of charge; under the GENIUS Act, reserves must cover 100% in cash, deposits or short-term Treasury bills.

Smart Contract and Technology Risk (Crypto-Backed / Algorithmic)

Crypto-backed and algorithmic stablecoins depend on code. Vulnerabilities and exploits in DeFi protocols can drain collateral, and oracle manipulation, feeding false price data into a protocol, can trigger improper liquidations. Complexity is itself a risk: mechanisms that few users fully understand can fail in ways their designers did not anticipate.

Regulatory and Censorship Risk

Major issuers can freeze or blacklist wallet addresses, which protects against illicit use but conflicts with the permissionless ethos some users expect. The GENIUS Act makes this explicit in the US: all stablecoin issuers must possess the technical capability to seize, freeze, or burn payment stablecoins when legally required and must comply with lawful orders to do so. Regulators can also force issuers to stop. On 13 February 2023, the New York Department of Financial Services ordered Paxos to halt minting BUSD.

Systemic / Contagion Risk

Because the largest stablecoins are now deeply woven into both decentralized and centralized crypto markets, a major failure could cascade well beyond the token itself. The collapse of TerraUSD is the clearest warning of how fast that contagion can spread.

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8. Notable Failures: The TerraUSD (UST) Collapse

What Was TerraUSD?

TerraUSD (UST) was an algorithmic stablecoin on the Terra blockchain, designed to hold its dollar peg not with cash reserves but through an arbitrage mechanism linked to its sister token, LUNA. At its peak, UST was the third-largest stablecoin with an $18.7 billion market cap, and LUNA reached a $41 billion market cap at its all-time high of $119.18 on 5 April 2022. Much of UST's demand came from Anchor Protocol, which offered a roughly 20% yield that attracted billions in deposits.

How the Collapse Unfolded (May 2022)

In early May 2022, large withdrawals and sales overwhelmed the peg. The algorithm responded by minting enormous quantities of LUNA to compensate for the UST being dumped, which increased LUNA's supply exponentially and drove its price into the ground; in turn, the plummeting LUNA price meant even more UST had to be minted for redemptions, further crashing UST's price. Within days of the depeg beginning on 7 May, LUNA's price fell to fractions of a cent, a decline of over 99.999%. The event wiped out almost $45 billion in market capitalization within a week.

Lessons Learned

The episode showed that algorithmic stability without sufficient collateral is fragile, that unsustainably high yields (Anchor's 20%) are a warning sign rather than an opportunity, and that reflexive designs where the asset and its backing token are correlated can enter a death spiral. The regulatory consequences were lasting. The collapse shattered confidence in algorithmic stablecoins and pushed regulators worldwide to accelerate rules under frameworks like MiCA. The collapse ultimately led to Do Kwon's 15-year prison sentence in December 2025.

9. Stablecoin Regulation: The Global Policy Landscape

Why Regulators Are Paying Attention

Scale alone justifies oversight. Stablecoin market capitalization hit a record of about $313 billion in May 2026, according to DefiLlama, and the Treasury bills backing USDT and USDC alone place their issuers among the large holders of US government debt. Central banks and finance ministries cite systemic risk, consumer protection and monetary policy implications, and the TerraUSD collapse provided a concrete example of retail investors losing money at scale.

United States Regulatory Approach

The US took a major step in 2025. The GENIUS Act was signed into law on 18 July 2025, establishing a first-of-its-kind federal framework for payment stablecoins, with licensing, reserve, disclosure and compliance requirements for permitted issuers. The Act takes effect on 18 January 2027: the OCC approved its final implementing rules in October 2026, and issuers already operating must file their application before that date to keep doing so. Notably for savers, the Act bars payment stablecoin issuers from paying holders any form of interest or yield solely for holding or using the stablecoin. It builds on earlier enforcement signals, including the NYDFS action against Paxos and BUSD in 2023.

European Union: MiCA Framework

Europe moved first with a comprehensive regime. MiCA entered into force on 29 June 2023 and applies in stages: stablecoin-specific provisions (Titles III and IV) became applicable on 30 June 2024, and provisions for crypto-asset service providers (Title V) applied from 30 December 2024. MiCA draws a key distinction between token types: an EMT references a single official currency (a euro or a dollar stablecoin) under Title IV, while an ART references anything else, such as multiple currencies, a basket, or commodities, under Title III. The framework has already reshaped the market. MiCA Title V prohibits authorized providers from offering services in non-authorized EMTs to public customers in the EEA, and Tether has said the EU framework is incompatible with its current reserve composition, prioritizing other markets. The EU-wide transitional grandfathering period ended on 1 July 2026. As of November 2026 there are 25 authorized EMT issuers and no ART issuers, and European banks are preparing their answer: Qivalis, a consortium of 37 banks including BBVA and CaixaBank, is awaiting its licence in the Netherlands to launch a euro stablecoin.

Asia-Pacific and Emerging Markets

Asia-Pacific has moved quickly. Hong Kong's Stablecoins Ordinance took effect on 1 August 2025, creating a mandatory licensing regime supervised by the Hong Kong Monetary Authority (HKMA) for issuing fiat-referenced stablecoins in Hong Kong and for issuing Hong Kong dollar-referenced stablecoins elsewhere; the first licences, for HSBC and Anchorpoint (Standard Chartered, HKT and Animoca Brands), came on 10 April 2026. Singapore's MAS framework, in place since 2023, applies to single-currency stablecoins pegged to the Singapore dollar or G10 currencies, and issuers meeting all requirements can label their tokens “MAS-regulated stablecoins”. In Latin America, Brazil has treated stablecoin transactions as foreign exchange operations since 2 February 2026, in a country where, according to its Central Bank, stablecoins account for 90% to 95% of crypto-asset purchases. Elsewhere, approaches diverge: some developing economies embrace dollar stablecoins while others restrict them.

Key Regulatory Themes Globally

Across jurisdictions, four themes recur: reserve transparency and audit or attestation requirements, issuer authorization and capital standards, consumer protection and clear redemption rights, and AML/KYC obligations for issuers and intermediaries. Regulation, compliance, and legal frameworks form a dedicated track at MERGE Madrid, and participants at past editions have included Banco de España, the CNMV, and the European Banking Authority, among regulators from 40+ countries (participation, not endorsement).

10. Stablecoins vs. CBDCs: What's the Difference?

What Is a CBDC?

A central bank digital currency (CBDC) is a digital form of sovereign money, issued and controlled directly by a central bank. It can be retail, for citizens and businesses, or wholesale, used only by institutions to settle with each other. Examples include China's e-CNY, Nigeria's eNaira, Brazil's Drex, which has set blockchain aside in its first phase, and the digital euro: the ECB expects a first issuance in 2029 if the regulation is adopted in time, after a pilot in 2027, and its design looks more like a European instant payment system than a cryptocurrency. The key difference from a stablecoin lies in the nature of the liability: a CBDC is a claim on the central bank, while a stablecoin is a claim on a private issuer.

Side-by-Side Comparison

Where They Could Coexist or Compete

The two may end up complementary rather than rivals. CBDCs could serve as wholesale settlement infrastructure underneath stablecoins, something the Eurosystem is already preparing with Pontes, a pilot that connects blockchain platforms to the TARGET systems to settle in central bank money, and Appia, its long-term roadmap. Stablecoins, for their part, cover the ground central banks will not serve directly, such as permissionless access and DeFi integration. Privacy concerns about state-visible CBDCs could sustain demand for private stablecoins. There is also a geopolitical angle: since the vast majority of stablecoins are dollar-denominated, their spread effectively extends dollar usage onto blockchain infrastructure, and Europe partly sees the digital euro as a way not to depend on US payment providers.

11. How to Earn Yield with Stablecoins

Why Stablecoin Yield Exists

Yield is not free money. It exists because borrowers in DeFi and CeFi pay interest to lenders, and because protocols pay incentives to attract liquidity. One important caveat applies in the US: under the GENIUS Act, regulated payment stablecoin issuers themselves cannot pay interest to holders, so yield comes from third-party lending and liquidity activity, each with its own risk.

Common Stablecoin Yield Strategies

CeFi lending platforms. Centralized platforms offer advertised returns on deposited stablecoins, with rates that move with market conditions. The risk is platform insolvency and withdrawal freezes, as the 2022 failures of firms like Celsius showed.

DeFi lending. Depositing stablecoins into protocols such as Aave or Compound earns interest paid by borrowers, with variable rates based on how heavily the pool is utilized. The risks are smart-contract bugs and governance failures.

Liquidity pools. Providing liquidity to stablecoin pools, such as Curve's USDT/USDC/DAI pool, earns trading fees plus token rewards, with relatively low impermanent-loss risk because the assets are all meant to hold the same value.

Risk Reminder

There is no yield without risk. Always assess smart-contract, counterparty, and regulatory exposure, and never treat advertised returns as guaranteed. Diversifying across protocols reduces, but does not remove, these risks. This section is educational and not investment advice; crypto-assets can lose value, and you can review the risk notice before making any decision.

Key Takeaways

• A stablecoin is a crypto-asset designed to track a reference value, usually the US dollar, through reserves, crypto collateral or algorithmic supply management. The market stood at around $300 billion at the end of October 2026, led by USDT and USDC.
• The four main types (fiat-backed, crypto-backed, commodity-backed, and algorithmic) trade off liquidity, decentralization, and resilience; algorithmic designs have proven the most fragile.
• Pegs can break: USDC fell to $0.87 in March 2023 over SVB exposure and recovered within 72 hours, while TerraUSD wiped out almost $45 billion within a week in May 2022.
• Regulation is now a concrete reality: the GENIUS Act was signed on 18 July 2025 and takes effect on 18 January 2027, MiCA's stablecoin provisions have applied since 30 June 2024 and its transitional period ended on 1 July 2026, Hong Kong granted its first licences in April 2026, and Brazil has treated stablecoins as FX operations since February 2026.
• Stablecoin yield reflects real borrowing and liquidity demand, not a free return, and carries smart-contract, counterparty, and regulatory risk.

If you want to go deeper into digital money, payments and the regulatory frameworks behind stablecoins, MERGE Institute covers them in Modules 1 and 2, with instructors who are working professionals at banks and infrastructure providers (taught in Spanish).

MERGE Institute

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A 12-week programme, taught in Spanish by working professionals. Stablecoins, CBDCs and tokenized money in Modules 1 and 2; MiCA in Module 7.

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FAQ: Common Questions About Stablecoins

What is the difference between USDT and USDC?

Both are fiat-backed, dollar-pegged stablecoins, but they differ in issuer, transparency and regulatory status. USDT (Tether) is the largest, with a market cap of about $182 billion and around 61% of the market at the end of October 2026, but it is not authorized under MiCA. USDC, issued by Circle, publishes regular attestations, is backed 1:1 by cash and short-term US Treasury bills held in segregated accounts and in the BlackRock-managed Circle Reserve Fund, and is an authorized EMT in the EU. The choice usually comes down to transparency preferences, use case and where each is available.

Can stablecoins lose their value?

Yes. De-pegging events have ranged from brief to total. USDC traded as low as $0.87 in March 2023 over Silicon Valley Bank exposure before recovering within 72 hours, while an algorithmic stablecoin can collapse entirely, as TerraUSD did in 2022. Fiat-backed tokens are generally the most stable but are not risk-free, and crypto-assets in general can lose value.

Are stablecoins regulated?

Increasingly, though it varies by jurisdiction. In the EU, MiCA's stablecoin rules have applied since 30 June 2024 and the full framework for service providers since 30 December 2024, with a transitional period that ended on 1 July 2026. In the US, the GENIUS Act was signed into law on 18 July 2025 and takes effect on 18 January 2027, becoming the first federal framework for payment stablecoins. Hong Kong's Stablecoins Ordinance took effect on 1 August 2025, and in Brazil stablecoin transactions have been treated as FX operations since 2 February 2026.

What is the difference between a stablecoin and a CBDC?

Stablecoins are issued by private companies and depend on the issuer's reserves and solvency; CBDCs are issued directly by central banks and carry full sovereign backing. CBDCs are legal tender where adopted, while stablecoins generally are not. CBDCs also tend to be more centralized and offer less privacy, whereas stablecoins vary widely in both.

How do algorithmic stablecoins work, and are they safe?

Algorithmic stablecoins use software rules to expand and contract supply to defend the peg, typically without holding equivalent reserves. They are considered the highest-risk category. TerraUSD's 2022 collapse wiped out almost $45 billion in market capitalization within a week, and the event shattered confidence in algorithmic stablecoins and accelerated regulation worldwide. Investor and regulatory trust in purely algorithmic models remains very low.

Can I earn interest on stablecoins?

You can, but not usually from the issuer. The GENIUS Act prohibits US payment stablecoin issuers from paying holders any form of interest or yield solely for holding the token. Yield instead comes from lending platforms and DeFi liquidity, where returns are variable and carry smart-contract, counterparty, and regulatory risk. Treat any advertised rate as conditional, not guaranteed, and review the risk notice before acting.