What is a stablecoin in simple terms?

A stablecoin is a digital token on a blockchain that tracks the value of a currency such as the US dollar or the euro. The main ones are backed one-to-one by cash and short-term government debt and can be redeemed at par with the issuer.

How they keep their value

The issuer holds reserves equal to the tokens in circulation. When someone buys tokens, the issuer adds to reserves; when someone redeems, it pays out and destroys the tokens. Trust depends on the quality of reserves and on the right to redeem.

Main types

• Fiat-backed: reserves in cash and short-term government securities. The most common type.
• Crypto-backed: reserves in other crypto-assets, usually overcollateralized.
• Algorithmic: rely on mechanisms rather than reserves. Several have failed, and regulators treat them with caution.

What they are used for

Trading on crypto platforms, cross-border transfers, treasury movements between businesses, and some merchant payments.

What makes them different from bank money

Transfers settle on the blockchain at any time, including weekends. But the holder depends on the issuer's reserves, not on a bank deposit guarantee.

What it means for payment operators

For you, stablecoins may appear as an additional payment rail, especially for cross-border flows. Connections that let your merchants add new rails without changing their integration keep that option open.