Stablecoins
Stablecoins let businesses move value globally with faster settlement and more predictable fees than legacy payment rails. Treasury and payments teams use them for cross-border payouts, vendor settlement, and automated liquidity operations that run 24/7.
What are stablecoins?
Stablecoins are blockchain-based digital assets designed to maintain a stable value. Unlike volatile cryptocurrencies such as Bitcoin or Ether, stablecoins are pegged to established currencies like the US dollar or Euro. Examples of USD-pegged stablecoins include USDC and USDT.
This page focuses on fully reserved, fiat-backed stablecoins. Other models (crypto-collateralized or algorithmic) have different risk profiles.
Real-world utility, increasing regulatory clarity, and growing institutional adoption are driving rapid growth in stablecoin usage. The circulating supply of stablecoins has grown more than tenfold over the past five years, reaching roughly $300 billion today. The US Treasury projects this figure could rise to $3 trillion by 2030.
How stablecoins work
Fully reserved fiat-backed stablecoins are issued by regulated entities and backed 1:1 with reserves such as cash and short-term government securities held at licensed financial institutions. Stablecoin issuers use a mint-and-burn process to keep the supply aligned with underlying reserves and ensure holders can always redeem stablecoins at face value.
When a user deposits fiat currency with an issuer, the issuer mints the corresponding amount of stablecoins onchain and sends them to the user. When the user redeems stablecoins for fiat, the issuer burns the tokens and sends the equivalent fiat from reserves.
Regulatory frameworks such as the EU's MiCA and the US GENIUS Act are establishing disclosure and reserve requirements for issuers. Requirements and enforcement still vary by jurisdiction, so businesses should evaluate each stablecoin and issuer on its own terms.
Why stablecoins matter for businesses
For financial institutions, corporations, and payment providers, fully reserved fiat-backed stablecoins enable near-instant payments that operate 24/7, work across borders, and bypass friction found in legacy payment rails.
They support established use cases such as remittances, global payouts, and embedded finance, while enabling newer applications like microtransactions and agentic commerce.
Programmable money
Stablecoins open the door to programmable money. Smart contracts can execute payments automatically based on predefined rules, improving efficiency and transparency in payment processing, liquidity management, and reconciliation.
For example, a global enterprise can use a smart contract to automatically top up or sweep subsidiary wallets based on balance thresholds. Routine treasury actions run automatically onchain, replacing custom integrations with multiple banking partners.
On Tempo, stablecoins follow the TIP-20 token standard, which adds transfer memos, compliance controls, and reward distribution to standard token functionality.
Stablecoins on Tempo
Tempo is purpose-built for stablecoin payments and issuance. Key resources:
- TIP-20 token standard: How stablecoins and other tokens behave on Tempo, including transfer memos and compliance policies
- Native stablecoins: How Tempo approaches stablecoin design, settlement, and fee payment
- Stablecoin DEX: On-chain exchange for stablecoin-to-stablecoin swaps
- Mint stablecoins: Create custom stablecoins with built-in compliance features
History of stablecoins
Stablecoins emerged as a solution to cryptocurrency's volatility. Tether (USDT), launched in 2014 on the Bitcoin blockchain via the Omni Layer protocol, pioneered the concept of a dollar-pegged digital asset. MakerDAO introduced DAI in 2017, creating the first decentralized, crypto-collateralized stablecoin. Circle and Coinbase followed in 2018 with USD Coin (USDC), emphasizing regulatory compliance and transparent reserves.
The 2020 "DeFi Summer" marked an inflection point. Total stablecoin market capitalization surged from under $10 billion to over $100 billion by 2021, as stablecoins became essential infrastructure for lending protocols, decentralized exchanges, and yield farming.
Regulatory frameworks are now taking shape globally. The EU's Markets in Crypto-Assets (MiCA) regulation established comprehensive stablecoin requirements including reserve mandates and issuer licensing. In the US, the GENIUS Act represents ongoing legislative efforts to create a federal framework for stablecoin issuance and oversight.
Stablecoin use cases
Stablecoins enable a wide range of payment and financial use cases:
Enable fast, cheap, and predictable cross-border money transfers for individuals and businesses
Deliver instant, low-cost payouts to employees and contractors anywhere in the world
Let platforms and marketplaces embed seamless payment flows directly into their applications
Move treasury liquidity instantly across borders with real-time visibility into global cash positions
Enable true pay-per-use pricing with sub-cent payments for APIs, content, and IoT services
Power autonomous agents with programmable payments for goods, services, and digital resources
Frequently asked questions
What is a stablecoin?
A stablecoin is a blockchain-based digital asset designed to maintain a stable value, often pegged 1:1 to a fiat currency such as the US dollar. Stablecoins combine blockchain settlement (24/7 transfers, programmability) with price stability useful for payments and treasury operations.
Are stablecoins safe?
Safety depends on the stablecoin's backing, redemption model, and issuer disclosures. Widely used USD-pegged stablecoins including USDC and USDT publish reserve reports or attestations. The frequency, detail, and regulatory regime vary by issuer and jurisdiction. Review reserve composition, redemption terms, and disclosure history before use.
How are stablecoins different from other cryptocurrencies?
Stablecoins target a fixed value (such as 1 USD), while cryptocurrencies like Bitcoin and Ether fluctuate based on market demand. This makes stablecoins practical for payments, settlement, and treasury workflows that require predictable amounts.
What are stablecoins used for?
Businesses use stablecoins for cross-border payments, vendor settlement, global payouts, and treasury liquidity. Stablecoins settle in minutes and operate 24/7, often with more predictable fees than traditional international wires.
How do I get stablecoins?
Businesses typically acquire stablecoins through regulated exchanges, direct onboarding with issuers like Circle or Tether, or payment providers that support stablecoin on-ramps. Enterprise teams often use licensed custodians for custody and settlement.
Are stablecoins regulated?
Regulation varies by jurisdiction and continues to evolve. Some regions have introduced issuer requirements for reserves, disclosures, and licensing (for example, the EU's MiCA framework). Confirm the rules that apply to your entity, counterparties, and operating geographies.
What is counterparty risk in stablecoins?
Counterparty risk is the risk that a stablecoin issuer cannot redeem tokens 1:1 due to insufficient or illiquid reserves, operational failures, or insolvency. Major issuers such as Circle (USDC) and Tether (USDT) publish reserve disclosures, but these are not real-time views of reserves. Businesses prefer reserves held in cash and short-term government securities.
What regulatory risks should I consider?
A stablecoin compliant in one jurisdiction may face restrictions elsewhere, and rules can change. Verify issuer licensing and compliance status where you operate, and confirm how custody, reporting, and redemption requirements apply to your use case.