These stablecoins use a computer algorithm to keep the coin’s value from fluctuating too much. If the price of an algorithmic stablecoin is pegged to $1 USD, but the stablecoin rises https://youtu.be/ilOtZhll4Ns?si=ihAggC33I4gsjoxF higher, the algorithm would automatically release more tokens into the supply to bring the price down. If it falls below $1, it would cut the supply to bring the price back up. How many tokens you own will change, but they will still reflect your share. One algorithmic stablecoin is AMPL, which its creators say is better equipped to handle shocks in demand.
You may not even notice you’re using stablecoins
China is not content to simply follow the United States down the path of permissionless, decentralized cryptocurrencies with anonymized transactions. Instead, it appears poised to marshal its considerable resources behind a new category of permissioned digital money—one designed to reinforce, not relax, state control. This emerging monetary architecture does not dismantle authority; it encodes it. Where bitcoin seeks to obscure identity and bypass central oversight, China’s vision is to hardwire identity and centralize control.
Regulatory Landscape for Stablecoins
They can provide inclusive, broad access to the financial system, and can enable fast and efficient money movement. Stablecoins are programmable, offering developers a useful digital currency that can be built into public blockchains and can help link the traditional economy and Web3. Many users drawn to assets like Bitcoin for payments can now transact with stablecoins — without the volatility and with increasing regulatory safeguards. In 2024, stablecoin transfer volumes exceeded $28 trillion, surpassing Visa and Mastercard combined, a sign that real-world use cases are gaining traction. From China’s perspective, dollar stablecoins are not just economically disruptive, but an outright political threat.
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The global regulatory environment for stablecoins is evolving rapidly, creating both opportunities and constraints for institutional adoption. While progress is being made, the current landscape remains complex and fragmented, with different jurisdictions advancing at varying speeds. Stablecoins present a compelling case for modernizing payments, but institutional adoption is gated by the industry’s ability to navigate these risks. Firms must strike a balance between innovation and security, leveraging tools that address the challenges of compliance, custody, operational scale, and cross-chain liquidity.
According to Coincub’s 2023 Blockchain Patent Report, China leads the world in the number of granted blockchain patents, accounting for roughly 68 percent of the global total. Ant Group, Tencent, and Shenzhen-based insurer Ping An Group rank among the top global filers, reflecting the state-led push to shape global blockchain infrastructure designed on China’s terms. The net effect of those crackdowns was that by 2021, China had banned most of the crypto industry from operating in the country. However, individuals could still own cryptocurrency as long as they did not engage in any banned activities. In fact, several court rulings dating back to 2018 from Shenzhen, Hangzhou, and Shanghai clarified that Chinese citizens have a legal right to own cryptocurrencies as virtual property. Similarly, while cracking down on cryptocurrency specifically, Chinese authorities never actually restricted the general use of blockchain technology for other purposes.
Payments built for business
- Fiat-backed stablecoins currently comprise about 87% of the total circulating supply and algorithmic stablecoins less than 0.2%.
- In May 2022, an escalating sell-off of the algorithmic stablecoin TerraUSD caused it to break its peg and plummet in price, eliminating over $45 billion in value within a week.
- Centralized stablecoins provide a digital option with the backing of a traditional currency.
- These areas are less sensitive to consumer habits and more focused on efficiency and cost, making them more open to new infrastructure.
Circle has developed the technology to enable USDC to run on public blockchain networks, with open-source and private market innovation driving rapid progress in digital dollar currency models. Read more about Circle’s insights on the Federal Reserve’s CBDC discussion. It’s possible that merchants will find ways to incentivize stablecoin payments.
They represent an evolution in how value can be stored, transferred, and settled, instantly, around the clock, and across borders. By easing access to foreign currencies, especially the dollar, stablecoins have grown sharply in countries with volatile fiat currencies. Argentina, Nigeria, and Turkey, plagued recently by extreme inflation and falling exchange rates, all show high stablecoin usage relative to other countries in the same regions. In a 2024 survey sponsored by Visa of crypto-technology users in Brazil, Turkey, Nigeria, India, and Indonesia, 47% of respondents reported that saving money in U.S. dollars was a primary reason for using stablecoins. Stablecoins are stored and exchanged on decentralized networks (known as blockchains) that serve as ledgers of all transactions.