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Why there's so much excitement around a cryptocurrency called stablecoin

An illustration picture taken in London on May 8, 2022, shows a souvenir Tether (USDT) coin, which is one of the world's biggest stablecoins.
Justin Tallis
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AFP via Getty Images
An illustration picture taken in London on May 8, 2022, shows a souvenir Tether (USDT) coin, which is one of the world's biggest stablecoins.

If you haven't heard of stablecoins yet — chances are you will soon.

There is perhaps no hotter segment in the cryptocurrency world at the moment than stablecoins. Companies like Amazon or Walmart are considering adopting them, while big banks such as JPMorgan Chase and Citigroup are exploring launching their own stablecoins, according to The Wall Street Journal.

What's more, Congress is on the verge of adopting legislation this week that would provide a formal framework for the sector, effectively making stablecoins part of U.S. regulations.

There's a reason behind the excitement. As a concept, stablecoins are pretty groundbreaking in the world of money.

A key vision behind stablecoins is that people and companies should be able to transfer money as digital currency anywhere in the world instantaneously, regardless of borders, without onerous banks or money transfer companies, that take time and charge fees, getting in the way.

But as detractors point out, there are real risks to stablecoins. Unlike the money we know, stablecoins are still new and regulations are still evolving. The relatively recent set of rules and its ease of use have also attracted shady actors like drug dealers and ransomware hackers.

So what are stablecoins? Here are three things to know.

The appeal: A safer cryptocurrency

Unlike other types of cryptocurrencies, stablecoins have a secret weapon that are meant to make them far safer.

That's because as the name implies, each stablecoin is meant to be stable. This is how it works: If you buy a stablecoin that's worth $1, the issuer that provided you with that stablecoin has to keep $1 in reserve, so that when you want to cash it you can get paid back promptly. (Dollars are primarily used to back stablecoins, but euros or some other asset of value like gold can also be used).

NPR's Planet Money — and others — have perhaps the neatest analogy.

Stablecoins are like the chips you get in a casino. Say you pay the cashier $100 and you get $100 in chips to gamble. Once you are done, you return whatever chips you have gained — or have left — and get the corresponding amount from the casino.

The issuer should be able to pay you back, just like you trust the casino will have the money when you go to cash in your chips.

It's probably the reason why stablecoins today are mainly used to buy and trade other cryptocurrencies such as bitcoin, because of the ease with which they can be converted to cash.

Stablecoins are used to buy and sell cryptocurrencies such as bitcoin, which is currently trading at record highs.
Romain Costseca / Hans Lucas / AFP via Getty Images
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AFP via Getty Images
Stablecoins are used to buy and sell cryptocurrencies such as bitcoin, which is currently trading at record highs.

The biggest company in this arena is Tether, which has a stablecoin called USDT and is based in El Salvador. The second is Circle, which issues a stablecoin called USDC.

Even President Trump is involved in stablecoins. World Liberty Financial, in which his family has financial interests, has issued one called USD1, meaning the president stands to benefit financially from the increased adoption of stablecoins (though as of now USD1 has a miniscule market share).

At the moment, the stablecoin market is worth just over $250 billion, but it's growing fast. Citigroup projects that the total amount of outstanding stablecoin could hit $1.6 to $3.7 trillion by 2030.

Congress is also on the verge of adopting legislation that would provide a formal framework for the sector, effectively making stablecoins part of U.S. regulations.

The GENIUS Act was passed by the Senate last month, and the House is expected to consider the legislation this week. (The acronym stands for "Guiding and Establishing National Innovation for U.S. Stablecoin".)

Among other aspects, the Act mandates that stablecoin issuers must hold proper one-to-one reserves and seeks to ensure that issuers are obeying anti-money laundering rules — though critics deride the measures as too weak.

Many see them as groundbreaking

The real excitement around stablecoins is that they provide a real-life advantage: They can make transferring money easier in a world where digital wallets and mobile payments are becoming more and more common.

In some developing countries, where dollars aren't easily accessible, companies with an international trading business are already starting to use stablecoin to expedite money transfers from their partners, transactions that usually take days or weeks through the traditional banking system.

With stablecoin, payments across companies can be transferred instantaneously at a fraction of the costs even if they are in different countries.

So far such payments are estimated at a mere $6 billion, a very small sliver of the market — but those in the industry see its potential.

Yellow Card, a stablecoin payments company with offices in 16 African countries, says it facilitates these types of transactions. CEO Chris Maurice says stablecoins provide a "bridge" for companies to interact with the global economy.

"It doesn't matter what industry you're in, it doesn't matter if you're in financial services or you're in the business of selling shoes on the side of the road. Everybody has the same set of issues when it comes to payments, especially international payments," says Maurice.

Stablecoins could make international transactions easier in emerging markets where dollars are not that easily accessible. In the picture, a man in Kampala, Uganda, reflects exchange rate changes on a board on Jan. 20, 2024.
Luis Tato / AFP via Getty Images
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AFP via Getty Images
Stablecoins could make international transactions easier in emerging markets where dollars are not that easily accessible. In the picture, a man in Kampala, Uganda, reflects exchange rate changes on a board on Jan. 20, 2024.

And it's not just companies — there are potential advantages for regular folks too.

Big retailers such as Amazon are hoping to benefit from stablecoins because they would no longer have to pay billions of dollars in fees for credit card transactions.

Buying something on Amazon or Walmart may seem instantaneous. But retailers have to pay fees and completing an entire transaction with different credit card companies or banks can take days.

"What people don't know is the payments that we all make every day, day to day, and the payments that institutions make back and forth to each other sometimes takes as much as a week to fully settle out and costs a fair amount of money for a fairly simple transaction," says Faryar Shirzad, Chief Policy Officer at crypto exchange Coinbase.

Stablecoins however can make that process faster.

"I think we're on the verge of a payment revolution in the United States," he adds.

But others see a big problem 

There's a question that still lingers: Are stablecoins actually safe?

When you get a stablecoin, you are effectively trusting that the company selling it to you is actually holding the equivalent dollars in reserves.

Stablecoin companies bristle at the question, and they are adamant that they safeguard their customers' money by parking them in ultra-safe investments such as U.S. Treasury bills.

But the concerns linger. New York's attorney general investigated Tether and crypto exchange Bifinex, accusing the two companies of not maintaining proper one-to-one reserves. The companies denied that, but the case was settled in 2021 with a $18.5 million fine, with the two crypto firms agreeing to be more transparent about their reserves.

Stablecoins, if adopted, could reduce the fees merchants such as Amazon must pay to credit cards.
Patric T. Fallon / AFP via Getty Images
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AFP via Getty Images
Stablecoins, if adopted, could reduce the fees merchants such as Amazon must pay to credit cards.

John Reed Stark, a former top financial regulator who served as chief of the SEC Office of Internet Enforcement, is a prominent critic of cryptocurrencies. He says it is a big leap of faith to believe that stablecoin companies are properly holding reserves backing the stablecoin.

"In most instances, we have no visibility to any stablecoins, no public audits, no examinations, no inspections — who knows what is really going on?," Reed Stark says.

He adds that even though it might seem more onerous, the current payment system has checks and balances in place via credit card companies or banks, which offer "a critical beneficial role for all consumers."

There's the other big concern about stablecoins: They are suspected of being used by all kinds of illicit actors like drug dealers and scammers who need a way to transfer money and access the cash without being detected by regulators or the police.

"Even though you can see every payment on the Internet, you don't necessarily know who it's from and who it's to," says Darrell Duffie at Stanford University, who teaches finance and management. And he adds, there are ways for people to "mask" their transactions to make them harder to detect.

Critics worry that stablecoins could even pose a threat to the financial system.

One of the biggest fears is that they will suffer the equivalent of a run on the bank, like Silicon Valley Bank which collapsed in 2023. A similar scenario could play out if customers rush en masse to cash in their stablecoins — and the issuers find themselves unable to pay back customers.

An event like that could have knock-on effects across the financial sector, just like the 2008 global financial crisis showed how trouble in one area of the financial system can quickly spread.

Stablecoin issuers are holding many of their customer reserves at traditional lenders, weaving in the banking system into the stablecoin sector. And stablecoin issuers also keep a huge chunk of their money in U.S. Treasury bills, which is a common practice across the sector.

So a run on the bank could force stablecoin companies to quickly draw in their reserves at traditional lenders and lead them to sell off their U.S. debt in a hurry, thus sparking intense volatility.

There's debate about how dire the threat would be, but that tension is still at the heart of the debate over stablecoins.

They have real-life potential — but they are a relatively new financial product, one that critics fear will open up all kinds of risks that may not be so apparent right now, leading to unintended consequences.

Copyright 2025 NPR

Corrected: July 15, 2025 at 8:29 AM MDT
An earlier version of the story incorrectly said Circle was the biggest stablecoin issuer while Tether was the second biggest. In fact, it's the reverse: Tether issues the biggest stablecoin, while Circle has the second-biggest stablecoin.
Rafael Nam
Rafael Nam is NPR's senior business editor.