When we say stablecoins, what’s the first thing that comes to mind… Something that's stable, something that isn’t volatile, something that’s safe? If your mind drifted towards any of these conclusions you’re on the right track. Allow us to fill in some gaps, to truly help you grasp the value that stablecoins bring to financial services, banking and ultimately our new era of finance that we’re being ushered into.
Stablecoins by definition are a type of cryptocurrency designed to maintain a stable value having been pegged to an asset. When a stablecoin is described as “pegged,” this means its value is designed to remain equal to or closely tied to the value of another asset. The term “peg” refers to a fixed or targeted exchange rate between the stablecoin and the reference asset, ensuring that the stablecoin’s price remains stable relative to the asset.
For example, a dollar-backed stablecoin like USDC, created by Circle Internet Group ($CRCL), is pegged to the US dollar at a 1:1 ratio meaning 1 USDC = $1. If you see a gold-backed stablecoin like PAXG, this would be pegged to the price of one troy ounce of gold, so 1 PAXG = the market price of one ounce of gold.
Now you might asking yourself, how is the peg maintained? Pegs are maintained through various mechanisms, depending on the type of stablecoin. Stablecoins breaks down into four categories:
1). Fiat-Collateralized 2). Crypto-Collateralized 3). Algorithmic 4). Commodity-Backed
So why is pegging necessary? Well, imagine using bitcoin or even a bar of gold to purchase an item. If either of the two assets drop 10% during the transaction itself, the seller as a result receives less value, meaning the buyer must spend more to make the deal whole. Long story short, when something is “pegged” it means its tying somethings value to a stable asset like the US dollar to ensure price predictability. This is necessary to make stablecoins practical for transactions of any kind, DeFi and more importantly bridging TradFi to the blockchain.
Let’s discuss why stablecoins are the solution to moving money on-chain. The two biggest reasons people avoid cryptocurrencies and blockchain technology because first, they don’t understand it and naturally as human beings we tend to reject things we don’t understand. The second reason is because the banks and media tell them they’re too dangerous, too volatile, and in some cases they are - like with memecoins. If you placed $100 into a memecoin Monday, you might wake up Tuesday to $2.37 left in your portfolio.
So why would anyone believe stablecoins, or anything having to do with crypto and something so volatile is the solution to moving money on-chain? By the way, when we say “moving money on-chain” we’re referring to conducting cryptocurrency transactions directly on the blockchain. For example, sending bitcoin from your personal wallet to someone else’s wallet, is an on-chain transaction because the details are recorded on the blockchain. Moving money on-chain implies leveraging the core features of blockchain technology to securely and transparently record cryptocurrency transactions between parties, without the need for traditional financial intermediaries, to be directly onto the blockchains distributed ledger.
Stablecoins are the preferred solution for moving money on-chain because they have the capability to combine the benefits of blockchain technology with price stability. By pegging to stable assets like the US dollar, stablecoins can avoid the extremely volatile price swings of cryptocurrencies from Bitcoin, making them much more reliable. On top of this, blockchain transactions that utilize stablecoins settle much faster, oftentimes within minutes or even seconds. Compare this to your traditional approach in using a bank, which can take days, especially for cross-border payments. Stablecoins can even reduce transaction fees by simply bypassing intermediaries like banks or payment processors. Stablecoins are also easily accessible for the unbanked and underserved populations breaking down barriers to entry, allowing anyone with internet access to participate in the new era of digital economy. However, connectivity is an even bigger issue here… reference our last post for more details about Global Network Connectivity in Crypto.
While stablecoins are such a transformative piece to bridging TradFi to DeFi, they are also susceptible to misuse in illicit finance due to their global reach and ease of accessibility. In 2024 alone, Chainalysis estimates that approximately $25-32B, yes that’s Billion with a “B” in stablecoins were received by illicit actors, and accounted for 12-16% of the total stablecoin market cap. Common uses include money laundering, evading sanctions, and even fraud. To make matters worse, the pseudonymity in crypto provides a layer of privacy that can hide a user’s real identity and their on-chain activity which can make stablecoins a very attractive place to start. Take Tether for example, TRM Labs estimates Tether (USDT) was linked to $19.3 billion of illicit transactions in 2023 alone, which was a decrease from $24.7 billion in the previous year. Originally, cryptocurrencies were and still are considered a black market until regulators in the United States actually start passing laws and guidelines for this space. I remember my first fake ID was even purchased using bitcoin back in 2013 - imagine if I would have held onto that :’( back then, and to be honest now it still is the Wild West until regulators step in. The truth is, they are beginning to step in and draft legislation like the GENIUS bill which we’ll get to in a minute.
Dollar-backed vs. Gold-backed stabelcoins
Examples of Dollar-backed stablecoins include USDT, USDC, BUSD, etc.
Pros:
- Widespread adoption, high liquidity
- Highly integrated
Cons:
- Dependence on issuer solvency
- Regulatory scrutiny
Examples of Gold-backed stablecoins include Tether Gold, PAXG, etc.
Pros:
- Hedge against inflation
- Another options for investors seeking tangible asset-backed tokens
Cons:
- Lower liquidity
- Storage & Custody costs may impact stability
- Less integration capabilities
So do stablecoins really need regulation, and why is the US government stepping in with the Genius bill? Is Trump just getting greedy trying to get his piece of the pie with crypto? Truth is, stablecoins do require a great deal of regulation due to their rapid growth and potential risks to financial stability, consumer protection and illicit finance prevention. Inadequate or mismanaged reserves may lead to a de-pegging, as seen in TerraUSD’s $45 billion collapse in 2022. Stablecoins integration with TradFi at such an early stage could also amplify any financial shocks if issuers fail. Not to mention their role in money laundering and sanctions evasion requires AML compliance.
The GENIUS Act, was passed by the US Senate on June 17th, 2025 and is currently pending with the House, the GENIUS Act establishes a federal regulatory framework for dollar-backed stabelcoins which aims to legitimize them, and further promote US dollar dominance, and foster innovation.
Some Key Rules (so far, not official yet):
- Requires issuers to hold 100% reserves in low-risk, liquid assets (e.g., cash, Treasury bills).
- Mandates regular audits and transparency disclosures.
- Allows dual state and federal licensing, with state standards needing to be “substantially similar” to federal ones.
- Strengthens AML and counter-terrorism financing rules.
Once the GENIUS bill is passed, this will provide clarity for issuers and encourage the likes of banks and even fintech corporations to participate. Funny thing about this is other jurisdictions like EU, Singapore, and Hong Kong have all implemented or officially proposed strict stable coin regulations, emphasizing reserves, transparency, and AML compliance. The longer this bill sits on Trumps desk, the further the US risks falling behind in the war of digital economies. It is also important to note this is the first time, to my knowledge that we’re seeing financial and economic warfare being used as leverage in an effort to secure better trade deals, which are ongoing as of today July 10th, 2025.
Now let’s dive into CRCL and Cardano. $USDC, issued by Circle, is a dollar-backed stable coin with a market cap exceeding $58 billion, at this time. It’s also readily available on multiple blockchains, including Cardano. $USDC is integrated with Cardano to enable fast, low-cost transactions within its ecosystem. This allows users on the Cardano blockchain to leverage $USDC for DeFi applications, payments, and even cross-chain settlements that will benefit from Cardano’s energy and cost efficient blockchain. Cardano supports stablecoins like $USDC and $DJED (a Cardano-native algorithmic stablecoin) to facilitate on-chain transactions and DeFi growth. While Cardano’s enhanced security in comparison to other blockchains presents itself as an ideal and reliable platforms for stable coin deployment, adoption lags far behind other blockchains like Ethereum and Solana. All this to say, Cardano’s stablecoin ecosystem is still developing, and its success depends on broader adoption and increased regulatory clarity from US lawmakers.
If there’s anything you need to take away from this, it’s that stablecoins are pivotal in bridging traditional finance and blockchain, offering stability for on-chain transactions but they still face challenges like illicit use and reserve risks. If you’re an active trader, stablecoins are your friends they present a safe haven for you to place your funds without having to worry about price volatility. Stablecoins are also ironically the trojan horse for banks to finally begin understanding the value in leveraging DeFi. They’re still a few steps behind, and those of us that DO understand it won’t hold it against them because this just means more fun for us in the meantime. If you haven’t experimented yet, do yourself a favor and go to AAVE or any other lending DeFi application and you’ll quickly see how valuable stablecoins can be in borrowing and lending.