Stablecoins: 10 Things You Need to Know

With the recent introduction of the GENIUS Act, stablecoins are gaining attention. Students and scholars in Cornell’s Emerging Markets Institute have been monitoring legislative and regulatory action and global developments related to this virtual asset and educating readers about it. Here are 10 important facts about stablecoins.

1. Stablecoins and cryptocurrencies are not the same. The term “crypto” commonly refers to a broad industry that includes cryptocurrencies, tokenized assets, non-fungible tokens (NFTs), stablecoins, and other virtual assets. However, from a technical perspective, cryptocurrencies and stablecoins are not the same. Stablecoins are virtual tokens—digital representations of value on a blockchain—designed to maintain price stability, usually by being pegged to an underlying asset like the US dollar. Cryptocurrencies such as Bitcoin or Ether are typically created through specific processes like mining or staking and operate on their own native blockchains. Stablecoins, on the other hand, are issued—mostly by private companies—and can exist across multiple blockchains.
2. Most popular stablecoins are issued by private companies. Tether (USDT) and USD Coin (USDC) are among the most widely used stablecoins, both pegged to a fiat currency. These stablecoins are issued and managed by private companies—Tether Limited and Circle, respectively—which are also responsible for maintaining their reserves. Beyond stablecoins, “crypto” is increasingly used as a store of value in the US and Europe, while in emerging markets like Argentina and Nigeria, it is more commonly used as a medium of exchange due to severe currency volatility.
3. Not all USD-backed full-reserve stablecoins are the same. The table below, based on publicly available data from Tether and Circle as of June 30, 2025, highlights key differences in their reserve strategies. Tether’s reserves are more diversified, including assets like Bitcoin, gold, and secured loans. USD Coin maintains a more conservative reserve model, primarily holding US Treasurys and cash equivalents.
   

   	USDT (million USD)	USDC (million USD)
   US Treasurys	105,519	27,040
   Cash & Cash Equivalent	24,435	34,358
   Bitcoin Holdings	8,929	—
   Gold Holdings	8,725	—
   Secured Loans	10,137	—
   Other Investments	4,815	—
   Corporate Bonds	15	—
   Total Reserve Assets (USD)	162,575	61,398

   Comparison of reserve assets held by USDT and USDC. USDT holds a diversified portfolio including U.S. Treasuries ($105.5B), cash equivalents ($24.4B), Bitcoin ($8.9B), gold ($8.7B), secured loans ($10.1B), other investments ($4.8B), and corporate bonds ($15M), totaling $162.6B. USDC holds primarily U.S. Treasuries ($27B) and cash equivalents ($34.4B), totaling $61.4B. This highlights USDT’s broader asset mix versus USDC’s conservative reserve strategy. (Source: Tether, Circle)
4. The price of a USD-backed stablecoin is still driven by supply and demand. Many people forget that stablecoins like USDT and USDC are traded on order books, where buy orders represent demand and sell orders represent supply. While users expect the price of a full-reserve USD-backed stablecoin to remain at exactly $1.00, in reality, it often fluctuates slightly—typically between $0.9995 and $1.0005 within a 24-hour window. Understanding this helps explain what happens when the 1:1 peg to a fiat currency breaks. If trust in the stablecoin issuer deteriorates, users may rush to sell the stablecoin—offering it for less than $1.00 (e.g. $0.95). Initially, someone might be willing to buy it at that discount, but if the sell-off continues, the market price will drop further, effectively breaking the peg.
5. Tether (USDT) has the highest trading volume in the crypto industry. Based on data published by CoinMarketCap on August 5, 2025, at 4:10 p.m., USDT’s 24-hour trading volume exceeded $102 billion—higher than any other cryptocurrency. This may seem surprising given its market capitalization of approximately $113.8 billion, compared to Bitcoin’s $1.5 trillion and Ethereum’s $484 billion, but it reflects USDT’s core function as a highly liquid medium of exchange rather than a store of value. USDT’s dominance is driven by its role as a “quote asset” on most crypto exchanges. Its availability across multiple blockchains, low fees, and near-instant settlement make it essential for traders, institutions, and decentralized finance protocols.
6. Stablecoins are relatively stable compared to cryptocurrencies. “Relative stability” refers to an asset’s ability to maintain a stable market price when compared to another asset. For example, comparing the price of USDC to Bitcoin, USDC is relatively stable. However, it’s important to understand that stablecoins are not absolutely stable; they can still experience short-term price fluctuations during times of stress such as the Silicon Valley Bank crisis (March 11–13, 2023) and the FTX collapse (November 10, 2022).
7. Stablecoins outperform legacy payment rails. Legacy payment rails refer to the traditional systems and infrastructure used to transfer money between individuals or institutions. These systems are primarily operated by central banks, financial institutions, and networks such as Swift. An article by McKinsey & Co. emphasizes that stablecoins can outperform traditional systems in several ways. They offer near-instant settlement, lower transaction fees (often under $0.10), and borderless functionality that reduces dependence on domestic banking infrastructure. They also enhance security through cryptographic mechanisms; enable full transparency via on-chain transaction tracking; and provide uninterrupted availability.
8. Stablecoins are on the rise. The market capitalization of a stablecoin represents the total value of all its units in circulation. It’s often used as a proxy to measure the overall size of the stablecoin market. How has the market evolved since 2021? To simplify the analysis, we’ll focus on USDT and USDC, using end-of-year data from CoinMarketCap (with 2025 data as of June 30). As shown, the combined market cap of USDT and USDC has grown from $120.41 billion in 2021 to $219.30 billion by mid-2025—an increase of over 82 percent. This upward trend highlights stablecoins’ growing role in decentralized finance (DeFi), trading, and cross-border payments—even amid market volatility and regulatory shifts.

   End-of-Year Market Cap	USDT (billion USD)	USDC (billion USD)	Combined
   2021	78.02	42.39	120.41
   2022	66.24	44.35	110.59
   2023	91.67	24.52	116.19
   2024	138.70	43.62	182.32
   2025 (until June 30th)	157.62	61.68	219.30

   Annual market capitalization data for USDT and USDC from 2021 to mid-2025. USDT grew from $78B in 2021 to $157.6B by mid-2025, while USDC rose from $42.4B to $61.7B. Combined market cap increased from $120.4B to $219.3B, showing an 82% growth, primarily driven by USDT capitalization growth. (Source: CoinMarket Cap)
9. Stablecoins play a vital role in DeFi. DeFi refers to a blockchain-based financial system that enables trading, lending, and saving without intermediaries, using smart contracts. To interact with DeFi protocols, users typically provide virtual assets as collateral; there’s no way to access DeFi with a traditional bank account or cash. Decentralized exchanges (DEXs) use stablecoins as base trading pairs, facilitating the exchange of tokens across different ecosystems. Additionally, yield farming and other passive income strategies in DeFi often rely heavily on stablecoins for liquidity, risk management, and reward distribution.
10. Companies are building with stablecoins. As regulatory clarity improves, several companies are leveraging stablecoins to enhance financial services. Notable examples include:

• Sphere: Provides stablecoin-based infrastructure for fast cross-border payments and payouts
• Rain: Offers payment cards that spend directly from stablecoin wallets
• Stripe: Supports USDC payments for remittances, B2B payouts, and global commerce
• Conduit: Enables seamless fiat-to-stablecoin on/off ramps within apps and wallets

About the author

Carlos Eduardo Bernos Amoros is a 2025 MBA graduate and current researcher at the Emerging Markets Institute at the Samuel Curtis Johnson Graduate School of Management. He specializes in fintech, blockchain, and cryptocurrencies. He is the cohost of Dentro del Bloque, a blockchain education podcast focused on Latin America with over 60 episodes. He has also conducted research for the Cornell Brooks School Tech Policy Institute, exploring the relationship between Bitcoin and financial freedom. Prior to the Johnson School, he worked in anti-money laundering compliance across the banking, fintech, and crypto industries, where he developed a strong passion for blockchain, Bitcoin, and emerging technologies.

All views expressed in articles published on the Emerging Markets Institute webpage are those of the author(s) and should not be taken as reflecting the views of the Emerging Markets Institute.