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Crypto & TokensGlossary

Stablecoin

A stablecoin is a crypto token designed to keep a fixed value, usually $1, backed by reserves. Plain-English definition, a reserve example and related terms.

Also called: payment stablecoin, dollar-pegged token

By The Token Thesis Desk2 min read4 cited sources

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“Leuchtturm in Westerheversand crop” by Marco Leiter — CC BY-SA 4.0 (edited: cropped, recolored)

Quick answer

A stablecoin is a crypto token designed to keep a stable value relative to a currency, usually one U.S. dollar, typically by holding reserve assets and promising to redeem coins at that fixed value.

What does stablecoin mean?#

The U.S. Treasury describes stablecoins as a type of digital asset generally designed to maintain a stable value relative to the U.S. dollar[1]. The Bank for International Settlements adds the key promise: they are crypto tokens that promise to always be worth a fixed amount of ordinary currency, such as one dollar, backed by the issuer's reserve assets and its capacity to meet redemptions[2].

In the U.S., the GENIUS Act of 2025 defines a payment stablecoin as a digital asset used for payment or settlement whose issuer is obligated to redeem it for a fixed amount of money, and requires permitted issuers to hold reserves on an at least 1 to 1 basis[3]. Those rules apply once the Act takes effect: 18 months after enactment or 120 days after regulators issue final rules, whichever comes first[4]. Rules differ by country.

What does a 1-to-1 reserve look like?#

Worked example

A hypothetical issuer with 1,000,000 coins

Each coin promises $1, so the issuer owes up to $1,000,000. It holds $1,020,000 of reserves, a ratio of 1.02 to 1, in the kinds of assets the GENIUS Act allows. The issuer and amounts are invented for illustration.

Reserve assetAmountShare of reserves
Cash and Federal Reserve balances$150,00014.7%
Bank demand deposits$250,00024.5%
Treasury bills (93 days or less)$620,00060.8%
Total reserves$1,020,000100.0%

Figures computed in code from the stated inputs; rounded to the nearest cent or tenth.

Is a stablecoin the same as a dollar in the bank?#

No. The GENIUS Act states that payment stablecoins are not backed by the full faith and credit of the United States and are not subject to FDIC deposit insurance[3]. Stablecoins can also trade below $1: the BIS notes their market price can deviate from par[2]. For how pegs hold and break, read what a stablecoin is; for tokens in general, see what a crypto token is. Stablecoins live on a blockchain, and the risks of holding them are covered in the risks of crypto investing.

Sources

Numbers in brackets in the text point here. Grade A = primary source (regulator, statistics agency, law or official document).

  1. 1
  2. 2
  3. 3
    Public Law 119-27 — Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act)U.S. Congress (via GovInfo, U.S. Government Publishing Office) (2025) · Grade A
  4. 4

How we checked this note

Every number, date and rule above links to its source. This note cites 4 sources, 4 of them primary (Grade A). Worked examples were calculated in code, and a second editor compared each figure with its source before publishing. Spotted an error? Tell us — corrections are listed on the note. Read our editorial policy.