Why stablecoins matter
Stablecoins solve a real fintech problem: moving dollar-denominated value across borders, around the clock, with finality measured in seconds rather than days. For corridors where SWIFT correspondent banking is slow and expensive, a fiat-backed stablecoin can be dramatically cheaper and faster.
For domestic US use, the case is weaker — we have RTP and FedNow. For cross-border, marketplace settlement to global payees, and on-chain liquidity, stablecoins have found durable product-market fit.
The major types
- Fiat-backed (USDC, USDT) — reserves of cash and short-term Treasuries
- Crypto-collateralized (DAI, sUSD) — overcollateralized by other crypto assets
- Algorithmic — mechanism-based pegs; historically prone to depeg events
Common pitfalls
- Reserve opacity. "Backed by dollars" only matters if the reserves are audited, segregated, and bankruptcy-remote.
- Regulatory perimeter. US state money-transmitter regimes and federal proposals (e.g., the GENIUS Act framework) shape what issuers and intermediaries can do.
- Confusing rails. A stablecoin on Ethereum mainnet is one cost/speed profile; the same stablecoin on Solana or a Layer 2 is different. Pick the network for the use case.
Stablecoins are a payment rail, not a magic asset; treat them with the same custody, AML, and reconciliation discipline you'd apply to any other dollar movement.