By Adegboyega Adeleye
The adoption of stablecoins in cryptocurrency is of huge value to the digital currency market. They were initially used primarily to buy cryptocurrencies on trading platforms that did not offer fiat currency trading pairs, but it has now evolved to being used in several blockchain-based financial services, such as lending platforms, and can even be used to pay for goods and services.
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It is important to note that stablecoins are not bitcoins. They aim to provide an alternative to the high volatility of popular cryptocurrencies. This cryptocurrency is fast becoming popular in the space, and its assets have attracted mainstream interest, including from investors seeking stability for their investments. Here are five important things to note about stablecoins.
1. Stablecoins are defined by stability
Stablecoins are cryptocurrencies whose value is intended to be pegged to a reference currency. They maintain their stability by being pegged to specific assets.
They also provide a more stable alternative to the high volatility of popular crypto assets like Bitcoin, making them more suitable for everyday transactions.
For example, the US Dollar is the asset that backs USDC and USDT, while gold backs PAXG, which means that the value of the stablecoin closely follows one of the assets it is pegged to. If the value of that asset rises, the value of the stablecoin will increase, and vice versa.
2. Market cap in 2025
According to DeFiLlalma, the data aggregator for DeFi, the total stablecoin market cap is $242 billion as of May 2025.
Stablecoins’ ascent in recent years has been striking. In 2025, its market cap surged to $246bn from $20bn in 2020. While this only accounts for 7.0% of the total crypto market cap, stablecoins dominate transaction flows.
3. Top three stablecoins in 2025
The top three in 2025 are:
– Tether (USDT): Launched in 2014, it is a stablecoin designed to maintain a 1:1 peg with the US dollar, backed by reserves held by Tether Limited.
– USD Coin (USDC): It is the second-largest stablecoin in the crypto market, pegged 1:1 to the U.S. dollar.
– USDS, launched in September 2024 under the Sky protocol (formerly MakerDAO), it is a decentralised stablecoin designed to improve scalability, user rewards and regulatory compliance. It is an upgraded version of DAI and, like DAI, is overcollateralized and pegged 1:1 to the US dollar. USDS is backed by assets such as ETH, USDC, and U.S. government bonds.
4. Regulations
Stablecoins are designed to function as electronic versions of regular fiat money. Regulations around it are evolving with the push for clarity and consumer protection. Two major bills, the GENIUS Act and the STABLE Act, are shaping the landscape, particularly in the United States, with an emphasis on one-to-one reserves and regular audits for stablecoin issuers.
In Europe, under the Markets in Crypto Assets Regulation, which took effect in 2023, algorithmic stablecoins are essentially banned, and all others must have assets held in custody by a third party. Reserves must be liquid and have a 1:1 ratio of assets to coins.
5. Defunct or already crashed stablecoins
Examples of those that have crashed or lost their peg in the market include:
– The stablecoin project Basis, which had received over $100 million in venture capital funding, shut down in December 2018, citing concerns about US regulation.
– Diem (formerly Libra) was abandoned by Facebook/Meta and later purchased by Silvergate Capital.
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