Stablecoins are 300 billion dollars of promises
In short
- A stablecoin is a crypto coin that aims to track a currency such as the dollar or the euro, in one of three ways: backed by money, backed by other crypto, or algorithmic.
- In May 2022 TerraUSD fell from 1 dollar to about 9 cents, and in March 2023 USDC briefly lost its dollar peg when 3.3 billion dollars of reserves were stuck at Silicon Valley Bank.
- DefiLlama shows a market of just over 305 billion dollars, of which Tether is about 60 percent.
- Under MiCA, stablecoin issuers in the EU need authorisation, holders can redeem at face value and no interest is paid. Tether did not apply for authorisation.
A stablecoin is supposed to do nothing. One coin is worth one dollar, today, tomorrow and next year. That sounds dull, and that is the point. It is still a large and important part of the crypto market, because you can move money quickly and cheaply with it.
The whole system rests on one thing: the promise that the coin really stays worth a dollar. How strong that promise is depends on who makes it and what stands behind it.
How big is the market
On 10 October 2026 DefiLlama showed a total stablecoin market value of just over 305 billion dollars. Tether (USDT) accounted for about 184 billion of that, roughly 60 percent. Circle's USDC stood at about 73 billion.
Other sources give higher numbers. KuCoin reported a record of about 315 billion dollars in early April and more than 320 billion on 16 April, based on DefiLlama. Differences come from timing and from how things are counted. I do not know whether the market has shrunk since spring or whether sources count differently. So the size is a range, not an exact figure.
What is clear is that the market is concentrated. According to KuCoin, the five biggest issuers together held more than 89 percent in the first quarter.
Three ways to hold a coin steady
Ethereum.org separates three kinds.
- Backed by money. USDT and USDC belong here. The issuer says that every coin has a dollar or something similar in reserve, for example short term US government bonds. The risk sits with the issuer and its reserves.
- Backed by other crypto. Dai and its successor USDS work this way. More crypto sits in collateral than there are coins in circulation, managed by smart contracts.
- Algorithmic. Nothing stands behind the coin. Code tries to steer the price by creating and burning coins.
The third kind is the most dangerous, as the next paragraphs show.
What went wrong at Terra
TerraUSD (UST) was algorithmic. It was held in place by a sister coin, Luna. New UST was created by burning Luna. As long as people kept trusting it, that worked.
In May 2022 UST lost its peg. The Register writes that UST fell from 1 dollar to 9 cents and that about 40 billion dollars in value disappeared. Founder Do Kwon was sentenced to fifteen years in prison on 11 December 2025.
The lesson is fairly plain. A system that has to defend its value with a coin that is itself losing value has no emergency brake.
What went wrong at USDC
Backed coins can wobble too. On 10 March 2023 Circle said that 3.3 billion dollars of USDC reserves sat at Silicon Valley Bank, which had just collapsed. USDC dropped overnight to 87 cents, its lowest since 2019. Circle promised to cover any shortfall itself. The coin then returned to the dollar.
That was not fraud and not a design flaw. It shows that with a backed stablecoin you also take on the issuer's bank.
What MiCA says
In Europe a first part of the MiCA rules for stablecoins has applied since 30 June 2024. The law has two types. An EMT is tied to one currency, such as the dollar or the euro. An ART refers to other assets or a basket of them.
According to the European supervisors, EMT holders can ask the issuer for their money back at face value. No interest is paid on them. In the Netherlands the AFM checks the white papers and De Nederlandsche Bank looks at issuers.
The European supervisors themselves warn that stablecoins may be less stable than they seem in tense markets. MiCA is also not a deposit guarantee like at a bank.
The Tether case
USDT is the biggest stablecoin in the world and does not meet MiCA. Tether did not apply for authorisation. The Paypers reports that the transition period ended on 1 July 2026 and that Coinbase, Kraken and Crypto.com, among others, stopped USDT trading for European customers. According to the same report, an issuer needs at least 60 percent of reserves in European banks to qualify. Tether mainly holds US government bonds.
Circle obtained a French electronic money licence, which lets USDC and the euro coin EURC operate across the EU. Thirty seven banks, including BNP Paribas and ING, are also working on a euro stablecoin called Qivalis.
What to look at
This is not advice, but these are the questions I would ask about any stablecoin. Who issues it and under what supervision? What is in the reserves and who checks that? Can I redeem the coin with the issuer or only on an exchange? Is the issuer in the ESMA register?
A stablecoin is not a savings account. If someone offers you a high interest rate on stablecoins, ask where that return comes from.
This is an explanation of how stablecoins work. It is not advice to buy, hold or sell any particular coin.
Sources
- DefiLlama: Stablecoins, consulted 10 October 2026
- KuCoin: stablecoin supply above 320 billion dollars, April 2026
- Ethereum.org: Stablecoins
- The Register: Do Kwon sentenced, 12 December 2025
- Decrypt: Circle to cover shortfall at Silicon Valley Bank, 11 March 2023
- The Paypers: Tether exits the EU market under MiCA
- De Nederlandsche Bank: MiCAR, 21 March 2024
- ESMA, EBA and EIOPA: crypto assets factsheet, October 2025
