Here we answer five common questions about stablecoins.
What are stablecoins and how are they used?
Stablecoins are a type of cryptocurrency token that maintain a fixed value by being pegged to a reference asset, typically fiat currencies such as the US dollar. Issuers achieve this by holding reserve assets, such as US Treasury bills, which provide 1:1 backing for the total value of the tokens.
The use of stablecoins have grown more prevalent along with the increased popularity of cryptocurrencies, as traders use them to hedge against major swings in prices. They can also move their capital among different assets or platforms without the need to convert back to fiat currencies.
An increasing number of businesses around the world are using stablecoins for cross-border payments and remittances, particularly in emerging markets with large underbanked populations.
What are the biggest stablecoins?
USDT, operated by Tether, is the world’s largest stablecoin, with US$152 billion worth of tokens currently in circulation. The company is incorporated in the British Virgin Islands and calls El Salvador its headquarters.