In today's cryptocurrency space, stablecoins have become a key element that cannot be ignored. Its unique value is not only reflected in the medium function of crypto asset transactions, but also shows revolutionary potential in traditional financial scenarios such as cross-border payment and settlement.
Written by: Crypto Salad
In today's cryptocurrency space, stablecoins have become a key element that cannot be ignored. Its unique value is not only reflected in the medium function of crypto asset transactions, but also shows revolutionary potential in traditional financial scenarios such as cross-border payment and settlement. The latest industry data shows that as of April 9, 2025, the global stablecoin market capitalization in circulation has climbed to $236.7 billion. Top asset management institutions, including BlackRock and Fidelity, as well as sovereign economies such as the European Union and Singapore, are accelerating the deployment of stablecoins. Circle, the issuer of the USDC stablecoin, has also recently officially submitted a prospectus to the US SEC, and is expected to land on the Nasdaq at a valuation of $5 billion to $7 billion, which has also become a microcosm of the booming industry.
What exactly is a stablecoin? Why do stablecoins maintain their stable value? **
What is the difference between stablecoins and other cryptocurrencies? **
What exactly are stablecoins used for? Why do we need stablecoins? **
**What are the mainstream stablecoins currently on the market? What are the differences between different stablecoins? **
The Crypto Salad team has been deeply involved in the cryptocurrency industry for many years and has rich experience in dealing with complex cross-border compliance issues in the cryptocurrency industry.
1. What exactly is a stablecoin?
There is no strict definition of the concept of a stablecoin. On the contrary, the extension and connotation of stablecoins are constantly changing with the development of the industry. Broadly speaking, a stablecoin refers to a cryptocurrency that can theoretically be maintained at a specific price for a long time, and its core feature is to maintain the relative stability of the currency value through a specific mechanism. **
However, it is important to make a clear distinction between central bank digital currencies (CBDCs) issued by monetary authorities of sovereign states and not as stablecoins. Specifically, the central bank digital currency maintains a 1:1 equivalent exchange relationship with the traditional fiat currency, and is supported by national credit as the underlying support, which is essentially a digital form innovation of legal tender, such as the digital yuan promoted by China's pilot. In the context of the crypto industry, stablecoins are mostly issued by private entities, and their value anchoring relies on commercial credit, collateral assets, or algorithmic protocols to maintain. This essential difference is also clearly reflected in the regulatory frameworks of various countries, and most jurisdictions have clearly divided central bank digital currencies and commercial stablecoins into different regulatory categories when formulating relevant regulatory policies to match their respective risk characteristics and policy objectives.
So why are stablecoins emerging in the crypto industry? To understand the use cases of stablecoins, we must first go back to the cryptocurrency market itself.
First of all, there were many different kinds of cryptocurrencies on the market before stablecoins existed. However, there is a huge pain point for investors at this time, that is, the price fluctuations of various cryptocurrencies in the market are significant. As a result, investors lack a stable store of value after taking profits, and the price fluctuations of cryptocurrencies can ultimately lead to unnecessary losses for investors. Therefore, the core problem solved by the emergence of stablecoins is the problem of store of value in the cryptocurrency world. **
If we draw an analogy with the real world, we can understand cryptocurrencies such as Bitcoin and Ethereum, which have significant price fluctuations, as an investment target, such as stocks. In contrast, stablecoins are the fiat currencies we use in the real world. We can buy the cryptocurrency we want to invest in by using stablecoins. After that, after the profit or loss of the investment, the corresponding cryptocurrency is exchanged back to the stablecoin, so as to lock in the profit or loss of your investment. This is one of the initial application scenarios and usage logic of stablecoins in the cryptocurrency market. Therefore, for investors, the first step to enter the cryptocurrency market for investment is to exchange real-world fiat currency for crypto-world stablecoins, and then use stablecoins to trade other cryptocurrencies.
In addition to the cryptocurrency market, with the further development and expansion of stablecoins, stablecoins are also widely used in various fields such as DeFi (decentralized finance), cross-border payment settlement, etc.
In the field of traditional cross-border payments, the flow of funds is still highly dependent on the banking system. This payment and settlement model, which relies on the traditional financial system, presents multiple challenges. First of all, cross-border payment needs to be processed by multi-level institutions such as correspondent banks and clearing banks, resulting in cumbersome and lengthy processes. In general, regular cross-border transfers take an average of 2-5 business days, and some complex transactions may even delay for more than 7 days. Second, the cost of cross-border payments is significantly higher than that of domestic transfers. According to industry research, the global average cost of sending remittances as of 2022 is around 6.38%. **
In addition, cross-border payments in the traditional banking system also face institutional bottlenecks. **For example, differences in capital controls, text requirements, and other compliance processes in different countries may result in payment delays; The foreign exchange control policies of some emerging market countries may directly lead to the interception or freezing of payment orders. These structural problems make it difficult for the traditional cross-border payment system to meet the needs of efficient, low-cost, and instant settlement in the digital economy era, leaving huge room for innovation in new payment solutions.
The Crypto Salad team found that the emergence of stablecoins is reshaping the landscape and ecology of the cross-border payment industry. Stablecoin payments show significant efficiency and cost advantages over traditional banking systems. Taking the current mainstream stablecoins as an example, a cross-border transfer can usually be completed in less than 2 minutes, and the whole process does not need to rely on complex correspondent bank networks or clearing institutions. Stablecoin payments achieve T+0 instant settlement, which significantly reduces the cost of capital occupation in cross-border payments.
What's more, the transaction costs of stablecoin payments are much lower than those of the traditional banking system. Using the Ethereum network as an example, according to YCharts, Ethereum's average gas fee has dropped from 72gwei in 2024 to just 2.7gwei (about 0.000005USD) on March 12, 2025. This low-cost feature significantly reduces the wear and tear of cross-border payment and settlement, which makes stablecoins have obvious advantages in small-amount high-frequency cross-border payment scenarios.
The above-mentioned efficiency leap is due to the empowerment of three technologies: first, the distributed ledger technology ensures that the payment information is uploaded to the chain in real time, and the synchronous verification of all nodes not only eliminates the traditional reconciliation link, but also builds a new trust mechanism through traceable and transparent account books; Secondly, the smart contract automatically executes the liquidation logic, avoiding the process delay caused by manual intervention. What's more, the blockchain network can operate 24 hours ×a day, 7 hours a week, completely breaking the liquidity shackles of the banking system that is subject to business hours.
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(The chart above shows the comparison between traditional banks and stablecoins in the field of cross-border payment, for reference)
In the field of decentralized finance (DeFi), stablecoins have become the cornerstone assets of its ecological operation. As an important medium of value in DeFi protocols, stablecoins not only provide stable and sufficient liquidity support for various decentralized platforms, but also further optimize the economic model of trading and lending on DeFi platforms through their low volatility characteristics. Taking lending protocols such as Compound and Aave as examples, stablecoins, as the main collateral assets and pricing units, can ensure the stability of the capital pool and avoid the liquidation risk caused by sharp fluctuations in the price of crypto assets.
2. What are the main stablecoins on the market, and what are the differences between different stablecoins?
At present, the mainstream stablecoins in the market can be divided into fiat currency-collateralized stablecoins, cryptocurrency-collateralized stablecoins, physical asset-collateralized stablecoins and algorithm-based stablecoins according to their collateralized physical asset classes. Next, the author will analyze each mainstream stablecoin from three perspectives: market capitalization, currency stability mechanism, and compliance.
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(The above picture is a comparison chart of several different types of stablecoins, for reference, which will be expanded in detail below)
(1) Fiat Currency Pegged Stablecoin
A fiat-pegged stablecoin is a stablecoin that is backed by fiat currency or corresponding cash equivalents. USDC and USDT account for the vast majority of the market share of stablecoins in circulation, with a combined market capitalization of more than $200 billion, accounting for more than 85% of the total circulating market value of stablecoins.
1、USDC
Basic information: USDC is issued and operated by Circle, and the stablecoin has a circulating market capitalization of about $60 billion so far.
Currency Stabilization Mechanism: Circle supports the stability of the USDC currency by overstocking assets such as U.S. dollar cash and short-term U.S. Treasury bonds. The so-called "excess reserves" means that the value of Circle's reserve assets for USDC will be slightly higher than the circulating market value of USDC, further ensuring the stability of the currency value. In addition, the relevant stablecoin reserves will be audited monthly by Deloitte, a third-party auditor, to disclose the corresponding reserves during the period.
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(The picture above is a schematic diagram of the reserves disclosed on the official website of Circle)
Compliance Framework: USDC's issuer, Circle, is a licensed money transmitter regulated by U.S. state law. The company is registered with the FinCEN (Financial Crimes Enforcement Agency) and has a remittance license (MTL) in several US states. Circle's regulated subsidiary became the first stablecoin issuer in 2024 to commit to complying with the value-related cryptoasset (VRCA) requirements issued by the Ontario Securities Commission (OSC) and the Canadian Securities Administrator (CSA). This allows USDC, a stablecoin issued by Circle Inc., to be publicly traded on crypto asset trading platforms in Canada. In 2024, Circle, as a leading digital payment platform, received a license for the issuance of the European Union's MiCA Directive for its stablecoins USDC and EURC. This also makes USDC the first mainstream stablecoin to meet the EU's MiCA compliance requirements. **
2、USDT
Basic information: USDT is issued and operated by Tether, and the stablecoin has a circulating market capitalization of about $60 billion so far.
Currency Stabilization Mechanism: Tether maintains the stability of USDT through a 1:1 reserve of cash and non-cash assets such as U.S. Treasury bonds, commercial paper, and money market funds. The mechanism is similar to USDC. At the same time, BDO Italia, a third-party auditor, publishes quarterly reserve reports instead of monthly ones.
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(The picture above is a schematic diagram of the reserves disclosed on Tether's official website)
Compliance framework: USDT's compliance is often questioned. Tether, the issuer of USDT, was fined $41 million by the CFTC (Commodity Futures Trading Commission) in 2021 for non-transparent reserves. Even with the fines, USDT's current reserve disclosures are still not fully transparent. In 2024, Tether** was investigated by OFAC for alleged OFAC sanctions violations due to the provision of stablecoin wallet services to OFAC (Office of Foreign Assets Control) sanctioned entities and alleged money laundering. **Eventually, Tether compromised with OFAC and froze $835 million in U.S. dollars related to illegal activities. At the same time, as of now, Tether has not received a license to issue MiCA in the European Union, so it is at risk of being delisted on European exchanges.
USDC and USDT, although both are mainstream fiat-collateralized stablecoins in the market. However, through the above analysis, it is not difficult to see that USDT's audit transparency and regulatory compliance are actually significantly inferior to USDC's. So why does UDST still hold such a high share of the outstanding market capitalization? **
The Crypto Salad team believes that USDT has been able to maintain a circulating market capitalization of hundreds of billions of dollars despite its obvious shortcomings in compliance and audit transparency, thanks to the complete ecosystem and network effects it has built in the crypto ecosystem. USDT's success is not accidental, but the result of a combination of factors, the core of which lies in its ability to penetrate both legal and non-traditional application scenarios.
First of all, the widespread use of USDT in legal scenarios has established its key position. As the world's largest stablecoin, USDT dominates cryptocurrency exchanges, with almost all major exchanges offering trading pairs of USDT and other cryptocurrencies, and its liquidity depth and trading volume far exceed that of other stablecoins. This makes USDT the main bridge between crypto assets and fiat currencies. In addition, USDT also plays a central role in the over-the-counter (OTC) market, and its convenience and wide range of use scenarios make it one of the key tools for institutions and individuals to enter and exit large amounts of funds.
However, what is truly unique about USDT is its widespread use in non-traditional scenarios. Despite its ongoing compliance controversy, USDT's anonymity, decentralization, and significant first-mover advantage make it the go-to tool for capital flows in some black and gray areas. For example, according to a United Nations report, cryptocurrencies led by USDT have become an important part of underground money banks and money laundering infrastructure in East and Southeast Asia, facilitating local transnational organized crime. As mentioned above, USDT has been investigated by OFAC for being used to transfer transactions to U.S. sanctioned entities, which also confirms this feature.
All in all, the first-mover advantage brought by USDT's early entry into the market has allowed it to form a self-reinforcing cycle in terms of counterparty trust, liquidity depth, and usage scenario coverage. Although stablecoins such as USDC have significant advantages in terms of audit transparency and compliance, USDT's current ecological position in the crypto world still needs to overcome two obstacles: user migration costs and ecological stickiness.
(2) Crypto-asset-linked stablecoins
1、DAI
Basic Information: The DAI stablecoin is issued by MakerDAO. As of now, DAI has a circulating market capitalization of around $3.1 billion.
Currency Value Stabilization: The stability of DAI does not rely on real-world fiat currency or cash equivalents, but is achieved through the over-collateralization mechanism of crypto assets. The core logic of this decentralized stablecoin is to transform value volatile assets into stable value carriers pegged to the US dollar, that is, DAI. It is essentially a dynamic collateral system based on crypto assets. **
Specifically, users need to lock crypto assets (such as ETH, BTC, etc.) to Maker Vault, a smart contract in the MakerDAO protocol, in excess proportion. Specifically, the value of staked crypto assets is generally 150%-300% of the value of DAI. The reason why users want to overcollateralize is because the price volatility of the crypto assets used as collateral is high, and overcollateralization can reduce the risk that the value of DAI will be decoupled due to drastic changes in the price of the collateral. When the value of the collateral decreases due to market volatility, the system will automatically trigger the liquidation process according to the smart contract, and maintain the anchor relationship between DAI and the US dollar through stability fees and liquidation penalties.
The subtlety of this overcollateralization mechanism is that it not only retains the decentralized nature of crypto assets, but also solves the centralized trust problem of traditional stablecoins through mathematical models, and finally realizes decentralized stablecoin issuance.
Compliance Framework: The Crypto Salad team found that, unlike the aforementioned Circle and Tether, MakerDAO is not a business entity in the traditional sense, but a decentralized autonomous organization (DAO) built on the Ethereum blockchain. The stability of DAI's currency value does not rely on the credit endorsement of centralized institutions, but is mainly maintained through an algorithm-driven dynamic collateral system and community consensus. While this design achieves the ideal of decentralization at a technical level, it also presents unique regulatory challenges. Due to the lack of a clear legal entity, DAI compliance is difficult to assess through the regulatory framework of the traditional financial system, and its transparency relies more on technical audits and internal governance than on external legal constraints.
(3) Stablecoins linked to physical assets
1、PAXG
Basic Information: PAXG is a gold stablecoin issued by the Paxos company. As of March 2025, PAXG has a market capitalization of approximately $1.87 billion, accounting for 76% of the gold stablecoin market.
Currency Stabilization: PAXG's physical gold reserves are held in escrow by the Paxos Trust Company. These bars are safely** stored in vaults such as Brink. **The gold reserves in the vault are reviewed and disclosed on a monthly basis by a third-party audit firm to verify that their gold reserves match the supply of the tokens. And, PAXG holders can redeem a certain amount of tokens for the corresponding amount of physical gold. Through the above legal structure, Paxos is able to ensure that one PAXG token is equivalent to one troy ounce of London standard delivery gold bar, and its value is directly linked to the real-time gold price in the market. Token holders can view their physical gold serial number, value, and other physical characteristics by entering their Ethereum wallet address in the PAXG lookup tool.
Essentially, the PAXG token is a RWA (Real World Asset) project based on the physical asset of gold. **Different from mainstream stablecoins, the price volatility of its underlying asset gold is higher than that of mainstream stablecoins such as cash or short-term treasury bonds, so there is a certain difference in positioning between the two. However, because the long-term value of gold as a safe-haven asset has always been recognized by the market in the midst of economic uncertainty, the characteristics of its underlying asset make PAXG functionally have certain stablecoin attributes, so it is included in the discussion of stablecoins.
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(Pictured above is a screenshot of the Gold Reserve Inquiry page on Paxos)
Compliance Framework: The issuance of PAXG is approved and regulated by the New York State Department of Financial Services. The issuer, Paxos, holds the gold reserves through a trust company, thus achieving complete segregation of the gold reserves from the issuer's assets, thus ensuring the independence and adequacy of the corresponding gold reserves.
In addition to the PAXG token, BUIDL (BlackRock USD Institutional Digital Liquidity Fund), issued by BlackRock, the world's largest asset manager, has performed particularly well in recent years. To date, the total market capitalization of the BUIDL token has exceeded $2.4 billion, making it an important player in the stablecoin market. BUIDL provides institutional and individual investors with a digital asset that is both liquid and profitable through an innovative tokenized fund design.
The token's underlying assets include U.S. Treasury bills, bonds, and other short-term securities guaranteed by the U.S. Treasury, ensuring the stability of its token value. The project also designed a well-developed compliance framework. Among them, Bank of New York Mellon acts as the custodian and fund administrator of the fund's underlying assets, ensuring the safety and transparency of the underlying assets; As the fund's auditor, PwC audits the fund's financial condition and operations, enhancing the fund's transparency and credibility.
(4) Algorithm-based stablecoins
An algorithmic stablecoin is a type of stablecoin that maintains its value pegged to a reference currency, usually the US dollar, through a complex smart contract algorithm. Unlike traditional collateralized stablecoins, algorithmic stablecoins do not rely on reserves of fiat currencies or cryptocurrencies, but simply achieve price stability by algorithmically regulating their supply and demand.
Since the stability of algorithmic stablecoins is overly dependent on the design and market conditions of the algorithm, once there is extreme market volatility or the stability algorithm is maliciously attacked, it is likely to lose its peg to the value of the reference currency. In May 2022, during the infamous "UST and Luna Thunderstorm", the price of the algorithmic stablecoin UST was de-pegged due to a malicious attack on the stability algorithm, and the price plummeted to zero. This black swan event not only led to the destruction of tens of billions of dollars of crypto assets, but also exposed the fatal flaws of algorithmic stablecoins in terms of algorithm mechanism vulnerabilities, market liquidity dependence and risk isolation mechanisms, and led to the complete collapse of the entire crypto market's trust foundation for algorithmic stablecoins. In the post-crisis era, regulators have listed such projects as high-risk areas, and investors have generally avoided related cryptocurrencies, which has directly led to a long-term silence on the algorithmic stablecoin track.
3. Interpretation of salads
The Crypto Salad team believes that the value foundation of stablecoins is built on double support:
First, the anchored physical or digital assets are used as the underlying guarantee,
The second is the liquidity and trust mechanism driven by market consensus
Consensus determines the scope of use and liquidity of the stablecoin, and the adequacy of reserve assets is directly related to the stablecoin's ability to resist risks. The dynamic equilibrium of the two constitutes the core stability of the stablecoin system.
However, the "stable" attribute of stablecoins is not absolute. The stability of stablecoins is essentially the result of dynamic equilibrium, rather than a static absolute guarantee. When there is a crack in the consensus of the stablecoin market or the reserve asset encounters systemic risk, it is likely to face the risk of currency price fluctuations or even de-anchoring. The recent de-pegging of stablecoin prices also confirms this view. In order to protect the legitimate rights and interests of stablecoin holders, the relevant regulatory framework and technical guarantee mechanism still need to be further developed and improved.
For the introduction and analysis of the regulatory framework of stablecoins in various countries around the world, the Crypto Salad team will continue to update, so stay tuned.
Special statement: It represents the personal views of the author of this article and does not constitute legal advice and legal advice on specific matters.
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Web3 Lawyer's Interpretation: What Key Points Must Be Paid Attention to in Enterprise Layout RWA?
Written by: Crypto Salad
In today's cryptocurrency space, stablecoins have become a key element that cannot be ignored. Its unique value is not only reflected in the medium function of crypto asset transactions, but also shows revolutionary potential in traditional financial scenarios such as cross-border payment and settlement. The latest industry data shows that as of April 9, 2025, the global stablecoin market capitalization in circulation has climbed to $236.7 billion. Top asset management institutions, including BlackRock and Fidelity, as well as sovereign economies such as the European Union and Singapore, are accelerating the deployment of stablecoins. Circle, the issuer of the USDC stablecoin, has also recently officially submitted a prospectus to the US SEC, and is expected to land on the Nasdaq at a valuation of $5 billion to $7 billion, which has also become a microcosm of the booming industry.
What exactly is a stablecoin? Why do stablecoins maintain their stable value? ** What is the difference between stablecoins and other cryptocurrencies? ** What exactly are stablecoins used for? Why do we need stablecoins? **
The Crypto Salad team has been deeply involved in the cryptocurrency industry for many years and has rich experience in dealing with complex cross-border compliance issues in the cryptocurrency industry.
1. What exactly is a stablecoin?
There is no strict definition of the concept of a stablecoin. On the contrary, the extension and connotation of stablecoins are constantly changing with the development of the industry. Broadly speaking, a stablecoin refers to a cryptocurrency that can theoretically be maintained at a specific price for a long time, and its core feature is to maintain the relative stability of the currency value through a specific mechanism. **
However, it is important to make a clear distinction between central bank digital currencies (CBDCs) issued by monetary authorities of sovereign states and not as stablecoins. Specifically, the central bank digital currency maintains a 1:1 equivalent exchange relationship with the traditional fiat currency, and is supported by national credit as the underlying support, which is essentially a digital form innovation of legal tender, such as the digital yuan promoted by China's pilot. In the context of the crypto industry, stablecoins are mostly issued by private entities, and their value anchoring relies on commercial credit, collateral assets, or algorithmic protocols to maintain. This essential difference is also clearly reflected in the regulatory frameworks of various countries, and most jurisdictions have clearly divided central bank digital currencies and commercial stablecoins into different regulatory categories when formulating relevant regulatory policies to match their respective risk characteristics and policy objectives.
So why are stablecoins emerging in the crypto industry? To understand the use cases of stablecoins, we must first go back to the cryptocurrency market itself.
First of all, there were many different kinds of cryptocurrencies on the market before stablecoins existed. However, there is a huge pain point for investors at this time, that is, the price fluctuations of various cryptocurrencies in the market are significant. As a result, investors lack a stable store of value after taking profits, and the price fluctuations of cryptocurrencies can ultimately lead to unnecessary losses for investors. Therefore, the core problem solved by the emergence of stablecoins is the problem of store of value in the cryptocurrency world. **
If we draw an analogy with the real world, we can understand cryptocurrencies such as Bitcoin and Ethereum, which have significant price fluctuations, as an investment target, such as stocks. In contrast, stablecoins are the fiat currencies we use in the real world. We can buy the cryptocurrency we want to invest in by using stablecoins. After that, after the profit or loss of the investment, the corresponding cryptocurrency is exchanged back to the stablecoin, so as to lock in the profit or loss of your investment. This is one of the initial application scenarios and usage logic of stablecoins in the cryptocurrency market. Therefore, for investors, the first step to enter the cryptocurrency market for investment is to exchange real-world fiat currency for crypto-world stablecoins, and then use stablecoins to trade other cryptocurrencies.
In addition to the cryptocurrency market, with the further development and expansion of stablecoins, stablecoins are also widely used in various fields such as DeFi (decentralized finance), cross-border payment settlement, etc.
In the field of traditional cross-border payments, the flow of funds is still highly dependent on the banking system. This payment and settlement model, which relies on the traditional financial system, presents multiple challenges. First of all, cross-border payment needs to be processed by multi-level institutions such as correspondent banks and clearing banks, resulting in cumbersome and lengthy processes. In general, regular cross-border transfers take an average of 2-5 business days, and some complex transactions may even delay for more than 7 days. Second, the cost of cross-border payments is significantly higher than that of domestic transfers. According to industry research, the global average cost of sending remittances as of 2022 is around 6.38%. **
In addition, cross-border payments in the traditional banking system also face institutional bottlenecks. **For example, differences in capital controls, text requirements, and other compliance processes in different countries may result in payment delays; The foreign exchange control policies of some emerging market countries may directly lead to the interception or freezing of payment orders. These structural problems make it difficult for the traditional cross-border payment system to meet the needs of efficient, low-cost, and instant settlement in the digital economy era, leaving huge room for innovation in new payment solutions.
The Crypto Salad team found that the emergence of stablecoins is reshaping the landscape and ecology of the cross-border payment industry. Stablecoin payments show significant efficiency and cost advantages over traditional banking systems. Taking the current mainstream stablecoins as an example, a cross-border transfer can usually be completed in less than 2 minutes, and the whole process does not need to rely on complex correspondent bank networks or clearing institutions. Stablecoin payments achieve T+0 instant settlement, which significantly reduces the cost of capital occupation in cross-border payments.
What's more, the transaction costs of stablecoin payments are much lower than those of the traditional banking system. Using the Ethereum network as an example, according to YCharts, Ethereum's average gas fee has dropped from 72gwei in 2024 to just 2.7gwei (about 0.000005USD) on March 12, 2025. This low-cost feature significantly reduces the wear and tear of cross-border payment and settlement, which makes stablecoins have obvious advantages in small-amount high-frequency cross-border payment scenarios.
The above-mentioned efficiency leap is due to the empowerment of three technologies: first, the distributed ledger technology ensures that the payment information is uploaded to the chain in real time, and the synchronous verification of all nodes not only eliminates the traditional reconciliation link, but also builds a new trust mechanism through traceable and transparent account books; Secondly, the smart contract automatically executes the liquidation logic, avoiding the process delay caused by manual intervention. What's more, the blockchain network can operate 24 hours ×a day, 7 hours a week, completely breaking the liquidity shackles of the banking system that is subject to business hours.
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(The chart above shows the comparison between traditional banks and stablecoins in the field of cross-border payment, for reference)
In the field of decentralized finance (DeFi), stablecoins have become the cornerstone assets of its ecological operation. As an important medium of value in DeFi protocols, stablecoins not only provide stable and sufficient liquidity support for various decentralized platforms, but also further optimize the economic model of trading and lending on DeFi platforms through their low volatility characteristics. Taking lending protocols such as Compound and Aave as examples, stablecoins, as the main collateral assets and pricing units, can ensure the stability of the capital pool and avoid the liquidation risk caused by sharp fluctuations in the price of crypto assets.
2. What are the main stablecoins on the market, and what are the differences between different stablecoins?
At present, the mainstream stablecoins in the market can be divided into fiat currency-collateralized stablecoins, cryptocurrency-collateralized stablecoins, physical asset-collateralized stablecoins and algorithm-based stablecoins according to their collateralized physical asset classes. Next, the author will analyze each mainstream stablecoin from three perspectives: market capitalization, currency stability mechanism, and compliance.
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(The above picture is a comparison chart of several different types of stablecoins, for reference, which will be expanded in detail below)
(1) Fiat Currency Pegged Stablecoin
A fiat-pegged stablecoin is a stablecoin that is backed by fiat currency or corresponding cash equivalents. USDC and USDT account for the vast majority of the market share of stablecoins in circulation, with a combined market capitalization of more than $200 billion, accounting for more than 85% of the total circulating market value of stablecoins.
1、USDC
Basic information: USDC is issued and operated by Circle, and the stablecoin has a circulating market capitalization of about $60 billion so far. Currency Stabilization Mechanism: Circle supports the stability of the USDC currency by overstocking assets such as U.S. dollar cash and short-term U.S. Treasury bonds. The so-called "excess reserves" means that the value of Circle's reserve assets for USDC will be slightly higher than the circulating market value of USDC, further ensuring the stability of the currency value. In addition, the relevant stablecoin reserves will be audited monthly by Deloitte, a third-party auditor, to disclose the corresponding reserves during the period.
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(The picture above is a schematic diagram of the reserves disclosed on the official website of Circle)
Compliance Framework: USDC's issuer, Circle, is a licensed money transmitter regulated by U.S. state law. The company is registered with the FinCEN (Financial Crimes Enforcement Agency) and has a remittance license (MTL) in several US states. Circle's regulated subsidiary became the first stablecoin issuer in 2024 to commit to complying with the value-related cryptoasset (VRCA) requirements issued by the Ontario Securities Commission (OSC) and the Canadian Securities Administrator (CSA). This allows USDC, a stablecoin issued by Circle Inc., to be publicly traded on crypto asset trading platforms in Canada. In 2024, Circle, as a leading digital payment platform, received a license for the issuance of the European Union's MiCA Directive for its stablecoins USDC and EURC. This also makes USDC the first mainstream stablecoin to meet the EU's MiCA compliance requirements. **
2、USDT
Basic information: USDT is issued and operated by Tether, and the stablecoin has a circulating market capitalization of about $60 billion so far. Currency Stabilization Mechanism: Tether maintains the stability of USDT through a 1:1 reserve of cash and non-cash assets such as U.S. Treasury bonds, commercial paper, and money market funds. The mechanism is similar to USDC. At the same time, BDO Italia, a third-party auditor, publishes quarterly reserve reports instead of monthly ones.
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(The picture above is a schematic diagram of the reserves disclosed on Tether's official website)
Compliance framework: USDT's compliance is often questioned. Tether, the issuer of USDT, was fined $41 million by the CFTC (Commodity Futures Trading Commission) in 2021 for non-transparent reserves. Even with the fines, USDT's current reserve disclosures are still not fully transparent. In 2024, Tether** was investigated by OFAC for alleged OFAC sanctions violations due to the provision of stablecoin wallet services to OFAC (Office of Foreign Assets Control) sanctioned entities and alleged money laundering. **Eventually, Tether compromised with OFAC and froze $835 million in U.S. dollars related to illegal activities. At the same time, as of now, Tether has not received a license to issue MiCA in the European Union, so it is at risk of being delisted on European exchanges.
USDC and USDT, although both are mainstream fiat-collateralized stablecoins in the market. However, through the above analysis, it is not difficult to see that USDT's audit transparency and regulatory compliance are actually significantly inferior to USDC's. So why does UDST still hold such a high share of the outstanding market capitalization? **
The Crypto Salad team believes that USDT has been able to maintain a circulating market capitalization of hundreds of billions of dollars despite its obvious shortcomings in compliance and audit transparency, thanks to the complete ecosystem and network effects it has built in the crypto ecosystem. USDT's success is not accidental, but the result of a combination of factors, the core of which lies in its ability to penetrate both legal and non-traditional application scenarios.
First of all, the widespread use of USDT in legal scenarios has established its key position. As the world's largest stablecoin, USDT dominates cryptocurrency exchanges, with almost all major exchanges offering trading pairs of USDT and other cryptocurrencies, and its liquidity depth and trading volume far exceed that of other stablecoins. This makes USDT the main bridge between crypto assets and fiat currencies. In addition, USDT also plays a central role in the over-the-counter (OTC) market, and its convenience and wide range of use scenarios make it one of the key tools for institutions and individuals to enter and exit large amounts of funds.
However, what is truly unique about USDT is its widespread use in non-traditional scenarios. Despite its ongoing compliance controversy, USDT's anonymity, decentralization, and significant first-mover advantage make it the go-to tool for capital flows in some black and gray areas. For example, according to a United Nations report, cryptocurrencies led by USDT have become an important part of underground money banks and money laundering infrastructure in East and Southeast Asia, facilitating local transnational organized crime. As mentioned above, USDT has been investigated by OFAC for being used to transfer transactions to U.S. sanctioned entities, which also confirms this feature.
All in all, the first-mover advantage brought by USDT's early entry into the market has allowed it to form a self-reinforcing cycle in terms of counterparty trust, liquidity depth, and usage scenario coverage. Although stablecoins such as USDC have significant advantages in terms of audit transparency and compliance, USDT's current ecological position in the crypto world still needs to overcome two obstacles: user migration costs and ecological stickiness.
(2) Crypto-asset-linked stablecoins
1、DAI
Basic Information: The DAI stablecoin is issued by MakerDAO. As of now, DAI has a circulating market capitalization of around $3.1 billion. Currency Value Stabilization: The stability of DAI does not rely on real-world fiat currency or cash equivalents, but is achieved through the over-collateralization mechanism of crypto assets. The core logic of this decentralized stablecoin is to transform value volatile assets into stable value carriers pegged to the US dollar, that is, DAI. It is essentially a dynamic collateral system based on crypto assets. **
Specifically, users need to lock crypto assets (such as ETH, BTC, etc.) to Maker Vault, a smart contract in the MakerDAO protocol, in excess proportion. Specifically, the value of staked crypto assets is generally 150%-300% of the value of DAI. The reason why users want to overcollateralize is because the price volatility of the crypto assets used as collateral is high, and overcollateralization can reduce the risk that the value of DAI will be decoupled due to drastic changes in the price of the collateral. When the value of the collateral decreases due to market volatility, the system will automatically trigger the liquidation process according to the smart contract, and maintain the anchor relationship between DAI and the US dollar through stability fees and liquidation penalties.
The subtlety of this overcollateralization mechanism is that it not only retains the decentralized nature of crypto assets, but also solves the centralized trust problem of traditional stablecoins through mathematical models, and finally realizes decentralized stablecoin issuance.
Compliance Framework: The Crypto Salad team found that, unlike the aforementioned Circle and Tether, MakerDAO is not a business entity in the traditional sense, but a decentralized autonomous organization (DAO) built on the Ethereum blockchain. The stability of DAI's currency value does not rely on the credit endorsement of centralized institutions, but is mainly maintained through an algorithm-driven dynamic collateral system and community consensus. While this design achieves the ideal of decentralization at a technical level, it also presents unique regulatory challenges. Due to the lack of a clear legal entity, DAI compliance is difficult to assess through the regulatory framework of the traditional financial system, and its transparency relies more on technical audits and internal governance than on external legal constraints.
(3) Stablecoins linked to physical assets
1、PAXG
Basic Information: PAXG is a gold stablecoin issued by the Paxos company. As of March 2025, PAXG has a market capitalization of approximately $1.87 billion, accounting for 76% of the gold stablecoin market. Currency Stabilization: PAXG's physical gold reserves are held in escrow by the Paxos Trust Company. These bars are safely** stored in vaults such as Brink. **The gold reserves in the vault are reviewed and disclosed on a monthly basis by a third-party audit firm to verify that their gold reserves match the supply of the tokens. And, PAXG holders can redeem a certain amount of tokens for the corresponding amount of physical gold. Through the above legal structure, Paxos is able to ensure that one PAXG token is equivalent to one troy ounce of London standard delivery gold bar, and its value is directly linked to the real-time gold price in the market. Token holders can view their physical gold serial number, value, and other physical characteristics by entering their Ethereum wallet address in the PAXG lookup tool.
Essentially, the PAXG token is a RWA (Real World Asset) project based on the physical asset of gold. **Different from mainstream stablecoins, the price volatility of its underlying asset gold is higher than that of mainstream stablecoins such as cash or short-term treasury bonds, so there is a certain difference in positioning between the two. However, because the long-term value of gold as a safe-haven asset has always been recognized by the market in the midst of economic uncertainty, the characteristics of its underlying asset make PAXG functionally have certain stablecoin attributes, so it is included in the discussion of stablecoins.
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(Pictured above is a screenshot of the Gold Reserve Inquiry page on Paxos)
Compliance Framework: The issuance of PAXG is approved and regulated by the New York State Department of Financial Services. The issuer, Paxos, holds the gold reserves through a trust company, thus achieving complete segregation of the gold reserves from the issuer's assets, thus ensuring the independence and adequacy of the corresponding gold reserves.
In addition to the PAXG token, BUIDL (BlackRock USD Institutional Digital Liquidity Fund), issued by BlackRock, the world's largest asset manager, has performed particularly well in recent years. To date, the total market capitalization of the BUIDL token has exceeded $2.4 billion, making it an important player in the stablecoin market. BUIDL provides institutional and individual investors with a digital asset that is both liquid and profitable through an innovative tokenized fund design.
The token's underlying assets include U.S. Treasury bills, bonds, and other short-term securities guaranteed by the U.S. Treasury, ensuring the stability of its token value. The project also designed a well-developed compliance framework. Among them, Bank of New York Mellon acts as the custodian and fund administrator of the fund's underlying assets, ensuring the safety and transparency of the underlying assets; As the fund's auditor, PwC audits the fund's financial condition and operations, enhancing the fund's transparency and credibility.
(4) Algorithm-based stablecoins
An algorithmic stablecoin is a type of stablecoin that maintains its value pegged to a reference currency, usually the US dollar, through a complex smart contract algorithm. Unlike traditional collateralized stablecoins, algorithmic stablecoins do not rely on reserves of fiat currencies or cryptocurrencies, but simply achieve price stability by algorithmically regulating their supply and demand.
Since the stability of algorithmic stablecoins is overly dependent on the design and market conditions of the algorithm, once there is extreme market volatility or the stability algorithm is maliciously attacked, it is likely to lose its peg to the value of the reference currency. In May 2022, during the infamous "UST and Luna Thunderstorm", the price of the algorithmic stablecoin UST was de-pegged due to a malicious attack on the stability algorithm, and the price plummeted to zero. This black swan event not only led to the destruction of tens of billions of dollars of crypto assets, but also exposed the fatal flaws of algorithmic stablecoins in terms of algorithm mechanism vulnerabilities, market liquidity dependence and risk isolation mechanisms, and led to the complete collapse of the entire crypto market's trust foundation for algorithmic stablecoins. In the post-crisis era, regulators have listed such projects as high-risk areas, and investors have generally avoided related cryptocurrencies, which has directly led to a long-term silence on the algorithmic stablecoin track.
3. Interpretation of salads
The Crypto Salad team believes that the value foundation of stablecoins is built on double support:
Consensus determines the scope of use and liquidity of the stablecoin, and the adequacy of reserve assets is directly related to the stablecoin's ability to resist risks. The dynamic equilibrium of the two constitutes the core stability of the stablecoin system.
However, the "stable" attribute of stablecoins is not absolute. The stability of stablecoins is essentially the result of dynamic equilibrium, rather than a static absolute guarantee. When there is a crack in the consensus of the stablecoin market or the reserve asset encounters systemic risk, it is likely to face the risk of currency price fluctuations or even de-anchoring. The recent de-pegging of stablecoin prices also confirms this view. In order to protect the legitimate rights and interests of stablecoin holders, the relevant regulatory framework and technical guarantee mechanism still need to be further developed and improved.
For the introduction and analysis of the regulatory framework of stablecoins in various countries around the world, the Crypto Salad team will continue to update, so stay tuned.
Special statement: It represents the personal views of the author of this article and does not constitute legal advice and legal advice on specific matters.