Understanding the Growth and Safety of Stablecoins

Stablecoins have quietly become one of the most important building blocks in digital assets. By the end of 2025, the total stablecoin market surpassed $300 billion in circulating supply, with US dollar–pegged tokens USDT and USDC accounting for the overwhelming majority, according to CoinMarketCap.

This scale matters because stablecoins are no longer viewed as experimental. They're widely used in moving value, settling transactions, and increasingly, to pay for real-world goods and services. As their role expands, so does the question: how safe are they, really?

Why Stablecoins Were Created

Digital asset users needed a way to store and transfer value without the extreme price swings of assets like Bitcoin or Ether. Stablecoins solved that problem by anchoring digital tokens to familiar currencies, like the US dollar, while retaining the speed and programmability of blockchain networks.

Their growth accelerated sharply in recent years as users began using stablecoins for cross-border transfers, on-chain settlement, payroll, and everyday payments. In many regions, sending a stablecoin became faster and cheaper than sending money through traditional banking rails, PwC reported.

What Makes Stablecoins Stable

Most major stablecoins aim to maintain a 1:1 peg to a fiat currency, meaning each token is intended to be redeemable for an equivalent amount of real-world money. In practice, this is most commonly the US dollar, which dominates global stablecoin usage due to its central role in international trade, finance, and settlement. While euro- and other currency-pegged stablecoins do exist, US dollar–pegged tokens remain the most widely used today.

Fiat-backed stablecoins like USDT and USDC maintain their peg by holding reserves such as cash and short-dated government securities. When demand rises or falls, issuers mint or redeem tokens accordingly to keep supply aligned with real dollars. This mint-and-redeem mechanism helps keep the supply of tokens aligned with real-world assets and supports price stability around the target peg.

This reserve-backed model differs from algorithmic stablecoins, which rely on market incentives and code rather than holding real-world reserves. The collapse of TerraUSD (UST) in 2022 highlighted the fragility of this approach: when confidence in the system broke, there were no underlying reserves to absorb selling pressure, and the peg unraveled rapidly.

Even reserve-backed stablecoins are not entirely immune to stress. Major stablecoins like USDT and USDC have briefly traded below their intended $1 value during periods of market panic or broader financial disruption. In these cases, the peg recovered as redemptions were processed and confidence returned — underscoring the importance of liquidity and reserve credibility.

Understanding the Risks

Stablecoins are designed to stay pegged to the dollar, and while they generally hold their value reliably, they are not completely risk-free. The main risks include:

• Peg risk
  • Stablecoins can temporarily fall below or rise above their peg if many users redeem or sell at once. For example, USDT briefly dipped below $1 during market stress in 2020, but recovered quickly.
• Reserve risk
  • The safety of a stablecoin depends on the quality and transparency of the assets backing it. If reserves are opaque or composed of illiquid assets, there’s a higher chance the peg could be challenged during market stress.
• Regulatory risk
  • Governments are actively regulating stablecoins to protect users and maintain financial stability. Changes in rules, such as reserve requirements, auditing standards, or licensing, can impact how a stablecoin operates and how safely users can use it.

How Regulation Is Catching Up

In recent years, stablecoin regulation has moved from discussion to implementation. Frameworks like the EU's MiCA, Singapore's MAS stablecoin regime, and the U.S. GENIUS Act introduced clearer rules around:

• What assets can back stablecoins
• How reserves must be disclosed and audited
• Who is allowed to issue and redeem them

For example, the GENIUS Act, passed in the U.S. in 2025, sets federal standards for stablecoins used as digital dollars. It requires issuers to fully back their tokens with safe, liquid assets (like dollars or Treasury bills), disclose reserves, and comply with consumer protection and anti-money-laundering rules.

For everyday users, this means more predictable redemptions, stronger transparency, and clearer protections.

What This Means for Everyday Spending

Most people using stablecoins aren’t thinking about reserve composition or redemption mechanics. They care about two things: stable value and smooth payments. Stablecoins are increasingly being used because they move value faster, cheaper, and with fewer intermediaries than traditional payment systems. 

This is where regulated payment infrastructure becomes just as important as the stablecoin itself. Platforms like DeCard bridge stablecoins with everyday spending by removing conversion friction and offering exceptionally low FX rates, allowing users to spend their stablecoins globally as easily as traditional money without needing to manage the underlying complexity.

So, Are Stablecoins Really Stable?

Stablecoins don’t stay stable by default. Their reliability is actively maintained through reserves, liquidity, trust, and reinforced increasingly by regulation.

The most important insight is this: stability isn’t about whether a token trades at at 1:1 every second. It’s about whether users can reliably redeem value when it matters most.

As regulation tightens and infrastructure matures, stablecoins are steadily shifting from speculative tools into something more fundamental. They're becoming digital representations of money that actually works across borders and systems. This shift is what’s making stablecoins less of a question mark — and more of a cornerstone of modern payments.

Sign up for DeCard today and get $5 instantly when you start using your stablecoins for everyday spending!