THE GUIDE · DIGITAL ASSETS · 13 MIN

A dollar that settles like a text message.

Strip away the crypto noise and a stablecoin is one idea: a digital IOU for a real dollar, moving on rails that never close. $320B+ of them now circulate — and the interesting part isn't the technology. It's who earns the interest.

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IN PLAIN WORDS — READ THIS FIRST

A stablecoin is a digital voucher for a real dollar. A company takes your dollar, parks it in cash and short-term US government debt, and issues you one token. The token moves like a text message — any hour, any country. The dollar stays parked, earning interest for the company.

Keep two questions in mind as you read: what happens if the token stops trading at exactly $1, and who keeps the interest on the parked dollars. The first is the risk. The second is the entire business model.

PART 01

Mint, move, redeem.

The whole life of a stablecoin dollar, in three legs. Note where it's instant and nearly free — and where the old world (and its fees) reappears.

PART 02

The business model is the float.

HOW THE PEG WORKS

A money-market fund wearing a token

A regulated dollar stablecoin like USDC is backed (post-GENIUS Act, by law) 1:1 with cash and short-term Treasuries. USDT, the largest, is issued by an offshore company on a contested compliance path whose past attestations have included other assets — same mechanic, different rulebook. Either way you hold the token; the issuer holds the T-bills and keeps the interest. At ~$190B of USDT earning ~4–5%, Tether became one of the most profitable companies per employee on earth. The product is free; the float is the business.

THE GENIUS ACT · US, 2025

From gray zone to licensed instrument

The 2025 US law — implementing rules proposed in early 2026, full effect by January 2027 — requires 100% high-quality liquid reserves, regular audits, and licensed issuers. Translation: stablecoins got the money-market-fund rulebook. The EU's MiCA did similar in 2024. Regulation didn't kill the product — it invited the banks in.

THE VOLUME ASTERISK

Read the $46T claim carefully

Raw on-chain volume (~$46T in 2025) gets compared to Visa — but much of it is bots, exchange shuffling, and the same dollar lapping the track. Adjusted "organic" volume is far smaller, though still trillions and growing fast. Both things are true: the hype inflates it, and it's still enormous.

WHEN PEGS BREAK

The two cautionary tales

Terra/UST (2022): an "algorithmic" stablecoin backed by confidence instead of collateral — $40B+ evaporated in a week. USDC (March 2023): briefly traded at $0.87 when Circle disclosed reserves stuck in Silicon Valley Bank — even real collateral has bank risk. Every rule now on the books traces back to one of these two weekends.

WHO ACTUALLY USES THEM

Less Starbucks, more São Paulo

Day-to-day retail payments? Rare — cards and instant rails are already good. The real demand: B2B cross-border settlement (treasury moving money on weekends), dollar savings in high-inflation economies — Sofía in Buenos Aires converts part of her paycheck to digital dollars the day she's paid, before the peso can lose more value — and exchange plumbing. Stablecoins win where local rails are weak or the local currency is weaker.

THE INCUMBENTS' MOVE

If you can't beat the rail, issue on it

Visa and Mastercard settle some flows in USDC; PayPal issued PYUSD; banks are piloting deposit tokens; payment processors quietly added stablecoin payouts. The pattern from every chapter repeats: new rails don't replace the old ones. They get absorbed by whoever owns distribution.

The words, one at a time.

Six terms run every stablecoin conversation. Learn these and the headlines start making sense.

The peg
the promise of exactly $1
The issuer's standing promise that one token can always be redeemed for one dollar. The market price hovers at $1 only as long as people believe it.
USDC redeems at $1.00 for verified institutions — even in March 2023, once the banks reopened on Monday.
Why it matters: a peg is a promise, and the market re-prices its faith in that promise every second.
Reserves
the real dollars behind the tokens
The assets the issuer holds against every token — under the new US and EU rules, 100% cash and short-term Treasuries, reported monthly.
$320B+ of stablecoins in circulation means roughly that much parked in cash and T-bills.
Why it matters: reserve quality decides whether a bad week mean-reverts or collapses.
Mint & redeem
dollars in, tokens out — and back
Verified institutions wire dollars to the issuer to create tokens, and hand tokens back for dollars at par. Retail users just buy and sell on exchanges.
Token trades at $0.99 → an institution buys it, redeems at $1.00, and pockets the cent. Supply shrinks; the price recovers.
Why it matters: that arbitrage loop is what actually holds the peg. No loop, no peg.
Depeg
the token stops trading at $1
The market price departs from the $1 promise, because traders doubt the reserves or can't reach redemption fast enough.
USDC touched ~$0.87 one weekend in March 2023 while $3.3B of its reserves sat in a failing bank.
Why it matters: which kind of depeg — liquidity or solvency — decides everything. The failure cards below unpack both.
On-ramp / off-ramp
the doors between money worlds
The licensed services that convert bank money into stablecoins and back — with KYC checks, fees, and local bank partners.
The Mumbai remittance: ~0.5% in, ~1% + FX out. The blockchain crossing in between cost five cents.
Why it matters: the crossing is nearly free; the doors are where the cost, the licenses, and the competition live.
The float
the interest on everyone's parked dollars
Reserves earn Treasury yield; token holders traditionally earn nothing. That spread is the issuer's revenue.
~$190B of USDT reserves earning 4–5% made Tether one of the most profitable companies per employee on earth.
Why it matters: every stablecoin partnership headline is really a negotiation over who keeps this interest.
PART 03

The remittance, rerun.

The $1,000 to Mumbai took the SWIFT chain and arrived $65 lighter. Same journey by stablecoin — honest version, ramps included:

The middle leg — the actual border crossing — costs cents and takes seconds, against $40 and days for correspondent banking. But the ends are where the fight is: getting local money into stablecoins (on-ramp) and out (off-ramp, with FX) still costs real money and needs licenses, compliance, and local bank partners. The disruptors aren't competing on the blockchain; they're competing on the ramps.

$320B+
stablecoins in circulation (May 2026) — USDT ~$190B, USDC ~$77B
24/7
settlement — no cutoffs, no weekends, no correspondent chain
REMITTANCE STATEMENT
USD → INR · VIA USDC · MINUTES
AMOUNT SENT$1,000.00
ON-RAMP ~0.5%−$5.00
NETWORK FEE−$0.05
OFF-RAMP + FX ~1%−$9.95
ARRIVES$985.00
COST 1.5% VS 6.5% BY SWIFT WIRE — RAMP PRICING VARIES WIDELY
CROSSING TIME  SECONDS–MINUTES · 24×7
CAVEAT  RECIPIENT NEEDS AN OFF-RAMP — THE REAL BOTTLENECK
WHEN IT BREAKS

When the peg slips.

Every rule now on the books traces back to a bad weekend. The three ways stablecoins actually fail, then a tree for reading a depeg while it's happening.

FAILURE 01 · THE LIQUIDITY DEPEG
USDC, March 2023
WHAT YOU SEEA fully reserve-backed token trades at ~$0.87 on exchanges while the issuer still promises $1.00.
WHY$3.3B of Circle's reserves sat in Silicon Valley Bank as it failed, and redemptions were closed for the weekend. The dollars existed; nobody could reach them until Monday. The market priced that doubt.
WHAT IT TEACHESA reserve-backed depeg is a question about when redemption reopens, not whether the dollars exist. USDC repegged on Monday — the people who sold at $0.87 turned a delay into a permanent loss.
FAILURE 02 · THE DEATH SPIRAL
Terra/UST, May 2022
WHAT YOU SEEAn "algorithmic" stablecoin slips to $0.98, then $0.60, then near zero inside a week. $40B+ evaporates.
WHYUST was backed by its own volatile sister token, not reserves. Redeeming UST minted more of a falling asset, so every exit accelerated the crash. There was no floor because there were no dollars.
WHAT IT TEACHESRead what backs the coin before the bad week. Collateral you can verify behaves like the USDC story; confidence dressed as collateral behaves like this one.
FAILURE 03 · THE FROZEN ADDRESS
Your tokens, switched off
WHAT YOU SEETokens sit in a wallet you control, keys and all — and the transfer still fails.
WHYMajor stablecoin contracts have a blacklist switch. Issuers freeze addresses under sanctions and court orders, and after hacks — the Tornado Cash sanctions made this concrete for thousands of addresses.
WHAT IT TEACHESA regulated stablecoin is censorable money by design. Self-custody protects your keys; it does not protect you from the issuer's own off switch.
YOUR STABLECOIN IS TRADING BELOW $1. HOW BAD IS IT?
1 · Is the low price showing on one exchange, or everywhere?
ONE VENUE ONLYA venue problem, not a depeg — thin liquidity or a withdrawal halt on that exchange. Other venues and the issuer's redemption price tell the real story.
EVERYWHERE — KEEP GOINGThe whole market has repriced it. Go to step 2.
2 · Is it backed by real, regularly reported reserves — cash and Treasuries?
YES — LIQUIDITY EVENTThe question is when redemption reopens and whether the reserves are reachable. These have historically mean-reverted once they were — March 2023 is the case study.
NO OR UNCLEAR — KEEP GOINGGo to step 3, quickly.
3 · Is the backing algorithmic, opaque, or the issuer's own token?
SOLVENCY DISCOVERYThere may be no floor. UST went from $1 to nearly nothing in a week, and no arbitrage loop could save it — the loop itself was the problem.
THE GENERAL RULEKnow which kind you hold before the bad week, not during it. The reserve report is the only document that answers this tree in advance.
COMMON QUESTIONS — ASKED PLAINLY

The things everyone wonders.

Five questions about digital dollars, answered without the crypto vocabulary.

IS A STABLECOIN THE SAME AS MONEY IN THE BANK?
No, and the difference shows up exactly when things go wrong. A bank deposit is insured — FDIC coverage up to $250,000 in the US, similar schemes elsewhere — and backed by the whole bank-regulation apparatus. A stablecoin is a claim on a private company's reserve fund, with no deposit insurance at all. The new laws made issuers hold better reserves and honor redemptions, which narrows the gap. It does not close it. On the trust ladder, a stablecoin sits a full rung below your checking account.
HOW DOES A FREE TOKEN MAKE ITS ISSUER BILLIONS?
You hand the issuer a dollar and get a token that pays you nothing. The issuer parks your dollar in Treasury bills earning 4–5% and keeps all of it. That's the whole trick: holders of $320B+ in stablecoins have collectively made an interest-free loan to the issuers, who invest it risk-free and pocket the yield. US law currently bars issuers from paying that interest to holders directly — which is why exchanges offer "rewards" on balances instead, and why the fight over the float is the real story behind most stablecoin news.
WHY USE A STABLECOIN INSTEAD OF A NORMAL BANK TRANSFER?
Inside one country with good rails — UPI, Pix, SEPA — you mostly wouldn't. The token wins at the edges: across borders (seconds and cents, against days and $40+ by correspondent banking), outside banking hours (the blockchain has no weekend), and in places where the local currency loses value faster than the local banks can be trusted. That last one is the quiet giant: for Sofía in Buenos Aires, a digital dollar is not a payment gadget. It is a savings account her own economy can't offer.
CAN A STABLECOIN ACTUALLY GO TO ZERO?
One did. Terra/UST erased $40B+ in a week in 2022 because it was backed by confidence in its own sister token rather than by dollars. A reserve-backed coin like USDC or USDT fails differently: the risk is the issuer or its banks, so the plausible bad outcome is a discount and a scramble — March 2023's $0.87 weekend — rather than instant zero. The regulation that followed (GENIUS in the US, MiCA in the EU) exists to keep the reserve-backed kind boring: real assets, monthly reports, guaranteed redemption. Boring is the entire product.
WHO CAN ACTUALLY TRADE A TOKEN IN FOR A REAL DOLLAR?
Directly from the issuer: only verified institutional customers — exchanges and trading firms that passed KYC, with minimums and cutoff times. Everyone else sells on an exchange and relies on those institutions to keep the price honest through arbitrage. This two-tier structure is why a depeg can happen at all: the retail price on exchanges can fall even while the institutional redemption window still pays $1.00. When you read "the peg held," it means the arbitrageurs kept those two prices stitched together.
FIELD NOTES — THE PRO LAYER

For the professionals.

The reserve-desk view: attestation vs audit, how depegs actually unfold, redemption mechanics, the CBDC question, and where the yield goes.

ATTESTATION vs AUDIT — READ THE FINE PRINT ON "BACKED"
Most 'proof of reserves' documents are attestations: an accountant confirms that at a moment in time, stated assets existed — agreed-upon procedures, narrow scope. An audit opines on complete financial statements: liabilities too, internal controls, the whole picture. The gap matters: an attestation can be true while the issuer owes more than it holds elsewhere. Post-GENIUS Act (US) and MiCA (EU), regulated issuers face monthly reserve reporting, composition rules (cash and short T-bills, not commercial paper — the reform Tether's 2021 CFTC settlement foreshadowed) and redemption guarantees. Professional reading order for any coin: who issues it, under which regime, what exactly does the monthly document assert, and who bears the gap if it's wrong — the same questions as deposit insurance in what money actually is, minus the insurance.
ANATOMY OF A DEPEG — TWO PRICES, ONE PROMISE
A stablecoin has two prices: the issuer's primary redemption promise ($1, for verified institutional redeemers) and the secondary market price everyone actually sees. Depegs happen when the secondary market doubts the primary promise or can't reach it fast enough. USDC, March 2023: $3.3B of reserves stuck in Silicon Valley Bank over a weekend — with redemptions closed until Monday, the secondary price hit ~$0.87 while arbitrageurs who trusted the Monday-morning redemption window bought the discount and were made whole. Terra/UST 2022 was the other species entirely: algorithmic backing (its own volatile sister token) meant redemption arbitrage itself minted the death spiral — $40B+ gone. The taxonomy lesson: fiat-reserve depegs are liquidity events that mean-revert if reserves are real; algorithmic depegs are solvency discoveries. Know which risk you're holding.
MINT/REDEEM MECHANICS — WHO TOUCHES THE ISSUER
Retail users almost never mint or redeem — they buy on exchanges. Direct mint/redeem runs through the issuer's verified institutional customers (exchanges, market makers): wire dollars → issuer mints coins (and vice versa), with KYC, minimums and cutoff times. Peg stability is really an arbitrage loop: secondary price below $1 → institutions buy cheap, redeem at par, pocket the difference, supply shrinks, price recovers. That loop is also the run mechanism — which is why regulation obsesses over redemption rights and timing (T+1 style guarantees under the new regimes). Also in the fine print: issuers can and do freeze addresses under sanctions orders (Tornado Cash made this concrete). A regulated stablecoin is censorable money by design — a feature to a compliance officer, a bug to a cypherpunk, a fact for everyone.
STABLECOINS vs CBDCs vs TOKENIZED DEPOSITS — THE THREE-WAY RACE
Three projects digitize the dollar/euro/rupee, with different liability holders. Stablecoin: liability of a private issuer, backed by reserves — permissionless distribution, credit risk on the issuer. CBDC: liability of the central bank itself — no credit risk, maximal policy control, privacy and disintermediation fights (the ECB's digital euro grinds forward; India pilots e₹; the US legislated against a retail CBDC in 2025's wave, choosing regulated stablecoins as the American answer). Tokenized deposits: your existing bank balance, on-chain (JPM Coin-style) — stays inside banking regulation, interoperates poorly outside its consortium. The 2026 scoreboard: stablecoins won distribution, tokenized deposits won institutional settlement pilots, CBDCs won policy papers. Payments professionals should watch where merchant acceptance lands — that's the race that pays.
WHERE THE YIELD GOES — THE FLOAT POLITICS
Reserves earn T-bill yield; coin holders traditionally earn zero. That spread is the business model (Circle and Tether's profits are functionally money-market funds with distribution) — and the battleground. US law (GENIUS) bars issuers from paying interest directly to holders, pushing the yield fight to structure: exchanges paying 'rewards' on balances, the Open USD consortium model distributing reserve income to distribution partners rather than holders, and tokenized money-market funds competing for the same wallet share with actual yield. Follow the float: every stablecoin partnership announcement is really a negotiation over who keeps the interest on your digital dollars.
PART 04

Remember three things.

1
A stablecoin is a bearer money-market fund. You get the dollar's stability; the issuer gets the dollar's interest. Understand that trade and you understand the whole industry — including why everyone suddenly wants to be an issuer.
2
The crossing was never the hard part. Like SWIFT before it, the middle is cheap — the ends are expensive. On/off-ramps, compliance, and local liquidity are where stablecoin businesses win or die.
3
Regulation was the unlock, not the threat. GENIUS Act + MiCA turned a gray-zone product into licensed infrastructure — and the immediate result was banks, networks, and PayPal piling in. The rebels built a rail; the incumbents are laying track on it.
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