Learn · Stablecoins
What are stablecoins? How they work, the types and the EU rules
A stablecoin is crypto that aims to stay worth the same as ordinary money, usually the dollar or the euro. Here's how that works, where it can go wrong and what Europe's rules say.
Stablecoins right now
EURC
€0.9994
tracks the euro
USDC
€0.8897
tracks the dollar
USDT
€0.8891
tracks the dollar
Prices in euros (CoinGecko) from our own database, updated every 15 minutes. If a dollar stablecoin is worth less than a euro, that's down to the exchange rate, not because it's lost its peg.
In short
- A fixed value, with the ease of crypto. A stablecoin is worth, say, 1 euro or 1 dollar, but you send it like crypto: fast, even at the weekend.
- Something has to back it. Most stablecoins are backed by money and safe investments held by the issuer. How good that backing is makes all the difference.
- Euro or dollar. Most stablecoins track the dollar. If you count in euros, a dollar stablecoin moves with the exchange rate.
- Tightly regulated in the EU. Since 30 June 2024, under MiCA you must always be able to swap a stablecoin back at full value, and the issuer isn't allowed to pay you interest.
- Not risk-free. A stablecoin can lose its peg, and the issuer can run into trouble.
What exactly is a stablecoin?
Ordinary crypto like bitcoin goes up and down a lot. A stablecoin doesn't, or at least that's the idea: one EURC should be worth one euro, one USDC one dollar. It's digital money that you send over a blockchain with a crypto wallet, just without the price swings.
There's usually a company behind it: the issuer. You give that company a euro, you get a stablecoin back, and the company holds on to that euro. Want your money back? Hand the stablecoin back in and you get your euro.
How does the price stay stable?
Swapping back at full value
The main trick is simple: you can always swap a stablecoin back with the issuer, at full value. If the price on an exchange drops below one euro, traders buy it up cheaply and swap it with the issuer for a whole euro. That pulls the price back up. If it goes above one euro, the opposite happens.
The reserve
That only works if the issuer really has the money. That's why issuers keep a reserve: money in the bank and safe investments such as short-term government bonds. In the EU that's compulsory, and the reserve has to be kept separate from the company's own money.
What types of stablecoin are there?
Not every stablecoin works the same way. What backs it decides how safe it is.
| Type | What backs it | Example | Biggest risk |
|---|---|---|---|
| Backed by money | Money in the bank and safe investments such as government bonds, held by the issuer | EURC, USDC | The issuer or its bank gets into trouble |
| Backed by crypto | Other crypto as collateral, usually worth more than the stablecoin itself | DAI | The collateral loses value too quickly |
| Algorithmic | No real backing: an algorithm has to keep supply and demand in balance | — | The balance breaks down and the price collapses |
Backed by money
- What backs it
- Money in the bank and safe investments such as government bonds, held by the issuer
- Example
- EURC, USDC
- Biggest risk
- The issuer or its bank gets into trouble
Backed by crypto
- What backs it
- Other crypto as collateral, usually worth more than the stablecoin itself
- Example
- DAI
- Biggest risk
- The collateral loses value too quickly
Algorithmic
- What backs it
- No real backing: an algorithm has to keep supply and demand in balance
- Example
- —
- Biggest risk
- The balance breaks down and the price collapses
In the EU, stablecoins that track a single currency, such as the euro or the dollar, are called e-money tokens (EMTs). Stablecoins that track a basket, for example of several currencies or commodities, are called asset-referenced tokens (ARTs) under MiCA.
What do you use stablecoins for?
- A break from the swings. After selling, you park your money in a stablecoin without leaving the crypto world.
- Trading. On lots of exchanges you trade against a stablecoin: buying bitcoin with USDC, for example.
- Sending money fast. Even at the weekend and across borders, usually within a few minutes.
- DeFi. Lots of apps on Ethereum and other networks work with stablecoins. There's more on Ethereum at what is Ethereum.
Stablecoins in the EU: what MiCA says
Since 30 June 2024, the MiCA rules for stablecoins have applied (Regulation (EU) 2023/1114). Anyone issuing an e-money token in the EU has to be a bank or an electronic money institution. You always have the right to swap your stablecoin back at full value, and the issuer isn't allowed to pay you interest for holding it.
Circle, the issuer of USDC and EURC, announced on 1 July 2024 that it issues both under MiCA, with an electronic money institution authorisation from the French regulator.
And stablecoins whose issuer isn't authorised in the EU? The regulator ESMA set a clear line on that on 17 January 2025: exchanges in the EU had to stop offering them by the end of March 2025 at the latest. If a stablecoin has disappeared from your exchange, that's often why. There's more on the rules in the MiCA dossier and in our article on stablecoins under MiCA.
The risks, laid out honestly
- The peg can break. In a panic, a stablecoin can drop below its value, and some stablecoins have never recovered.
- The issuer. If the issuer or its bank goes under, it depends on how well the reserve is protected.
- Exchange rate. Measured in euros, a dollar stablecoin isn't stable: if the dollar falls, your balance falls with it.
- Freezing. Issuers can freeze the stablecoins at an address, for example on the orders of the authorities.
- Not a savings account. The issuer pays no interest, and the deposit guarantee scheme doesn't apply.
Where to next
Frequently asked questions
Is a stablecoin the same as the digital euro?
No. A stablecoin is issued by a company. The digital euro, which the European Central Bank is working on, would be issued by the central bank itself.
Is a stablecoin always worth exactly one euro or dollar?
Almost always very close, but it isn't guaranteed. On an exchange the price can drift for a while, especially when markets are jittery.
Why is USDC worth less than a euro?
Because USDC tracks the dollar, not the euro. Measured in euros, it moves with the exchange rate between the dollar and the euro.
Do you get interest on a stablecoin?
Not from the issuer: under MiCA it isn't allowed to pay interest on e-money tokens. Platforms sometimes offer a reward, but then you're taking on extra risk.
Which stablecoins are allowed in the EU?
Stablecoins whose issuer is authorised under MiCA. Circle says USDC and EURC are covered. Not sure about another one? Ask your exchange or check the ESMA register.
Are stablecoins safe?
Safer than ordinary crypto when it comes to price swings, but not risk-free: the issuer, the reserve and the exchange rate all play a part.
Sources
- Regulation (EU) 2023/1114 (MiCA): Articles 48 to 50 on e-money tokens, and Article 149 on the rules applying from 30 June 2024.
- Circle, Circle is First Global Stablecoin Issuer to Comply with MiCA, 1 July 2024.
- ESMA, ESMA and the European Commission publish guidance on non-MiCA compliant ARTs and EMTs, 17 January 2025.
- Prices: our own database, updated every 15 minutes from CoinGecko.
All sources checked on 17 October 2026.