What is stablecoin?

A stablecoin ( stablecoin ) is a type of cryptocurrency that has been designed to maintain price stability, typically by tying its peg value to currencies such as the U.S. dollar or other assets through holding cash-equivalent reserves, or by adopting some form of monetary policy in order to keep their prices constant.[1] It can also be used as a bridge between traditional currencies and other cryptocurrencies, especially for cross-border transactions.[2]

However, each stablecoin is not secured in the same way. The quality and transparency of reserve funds can vary greatly between issuers. Some stablecoins lose their pegs during periods of high market volatility. Users should therefore understand how they are secured under whose supervision, particularly through disclosure policies and audits of issuer accounts before deciding to use them as a store-of-value tool.