A Stablecoin is a digital asset whose value is linked to another asset, which may be a fiat currency or another asset of a different nature, whether tangible or intangible. The correlation of the Stablecoin with these backing assets has as its primary objective the stabilisation of the digital asset’s value, thereby remedying its main weakness, namely price volatility in the market. The backing assets may essentially fall into four categories:
a) When a Stablecoin is backed by fiat currency (a fiat-collateralised Stablecoin), it is guaranteed by bank deposits, cash, or similar instruments. Typically, issuers of this type of Stablecoin hold the assets in financial institutions, particularly banks.
b) It may also be backed by financial assets (bond-backed Stablecoins), such as debt securities, Treasury bonds, or other similar or equivalent liquid financial instruments. In fact, Stablecoins are currently the second-largest holders of United States Treasury bonds, ahead of countries such as Japan, the United Kingdom, or China.
c) Stablecoins may also be backed by digital assets (crypto-backed Stablecoins), also known as “cryptocurrencies.” In this case, these assets do not have a central administrator, as is the case with the previously mentioned Stablecoins, but instead rely on Smart contracts that allow the lender to lock crypto assets as collateral and thereby generate new Stablecoins in the form of a loan. If the lender wishes to redeem the locked cryptocurrencies, they must return the Stablecoins to the protocol, minus the “gas” fees incurred on the blockchain protocol (validation operation). A representative example of this architecture is the DAI token.
It is also worth mentioning algorithmic Stablecoins, or digital assets that rely on smart contracts to maintain price pegs. In many cases, the algorithm acts on the number of tokens in circulation to preserve stability. Put simply, if prices rise, the algorithm mints new tokens and distributes them among existing holders, counteracting the increase and returning the token to a “stable” range so that it continues to track the value of the underlying asset. If the price of the Stablecoin falls, the algorithm “burns” or removes a number of tokens from circulation until the price readjusts.
The overwhelming majority of Stablecoins are backed by legal tender, particularly the U.S. dollar, due to the liquidity and historical stability of that currency in the market, as well as the confidence operators place in it. Likewise, many Stablecoins need to place liquid reserves, such as bank deposits, and the U.S. dollar debt and deposit market offers the best options. This creates a virtuous circle for the currency, attracting investors outside the conventional sphere who, in turn, contribute to financing U.S. public debt and, incidentally, generate an effect of “dollarisation” of Stablecoins. Finally, traders and Stablecoin platforms use USD-pegged tokens to settle transactions as well as for “cash on-chain” operations, a demand that incentivises the issuance of U.S. dollar-denominated Stablecoins.
When a user exchanges fiat currency for Stablecoins, the platform in question issues new Stablecoin tokens and puts them into circulation. The value of the crypto asset units issued is backed by an equivalent amount, which is held in reserve. When the user redeems Stablecoins for fiat money, the platform disposes of or destroys the tokens by withdrawing them from the available supply. Thus, this minting and burning mechanism maintains price stability and ensures that each unit of Stablecoin in circulation is backed by an equivalent amount of value held in reserve.
Stablecoins have become an increasingly common means of payment. To complete the transaction, that unit of digital value is previously converted into fiat currency, which is ultimately received by the seller of a given asset. The exchange of Stablecoins for goods or services would not constitute a payment per se, but rather an exchange of assets. Therefore, there is no true direct purchase using Stablecoins, which would in practice be equivalent to granting them a status equal or comparable to legal tender, a status they do not officially possess.
The media consistently warn of the dangers of Stablecoins, derived from their lack of liquidity or opacity, and suggest specific or even exhaustive controls over their activities and audits to verify the effective backing of assets. However, this criticism does not appear irrefutable, because some Stablecoin-issuing platforms, such as Tether (USDT) or Global Dollar (USDG), which together represent 90% of the Stablecoin market, are already subject to audits and publish the assets they hold in reserve to back the value of the tokens in circulation.
The reality is that Stablecoins exist, are growing, and appear destined to coexist with other assets or means of payment. In countries with high inflation, unstable currencies, or capital controls, they constitute a genuine alternative to the traditional banking system and a secure, fast, and inexpensive means of payment. Transactions between businesses and individuals are common for paying for services or goods and for receiving or sending remittances. The particular ease and speed of crypto operations enhance their effectiveness as a parallel formula to banks; for example, it is much faster to open a crypto wallet than a bank account. In practice, Stablecoins function as a medium of exchange and liquidity; intermediaries or traders use them to enter and exit the market, and crypto exchanges use them as base trading pairs. In other words, they are what the International Monetary Fund refers to as the “yield farm” of the crypto ecosystem, facilitating all economic activity within it.
Returning to Stablecoins as a means of payment, there are two reasons that justify their growing use: first, the high cost of international payments made with credit cards, and even domestic ones, as is the case in the United States (where payment costs are five times higher than in Europe); and second, the high cost of intermediation in international money remittances. According to the OECD, transactions via Stablecoins have increased in line with the growth of crypto assets. While in 2023 Visa transactions were double those carried out via Stablecoins, in 2024, that is, in just one year, Stablecoin transactions already surpassed those of Visa. This trend proves that payments via Stablecoins have consolidated and are advancing for the reasons noted above.
Stablecoins have enormous practical value in international transactions, since, as with other types of crypto assets (cryptocurrencies), they can be sent and received worldwide, without intermediaries and at commissions far lower than those of traditional financial intermediaries. To this must be added the immediacy and security of transactions derived from the blockchain technology that supports them.
The debatable issue is whether Stablecoins meet the three elements that characterise money: unity, elasticity, and integrity. While the opinion within the crypto community and market reality suggests that, although not perfect, Stablecoins are genuine currencies with reliability equal to or greater than that of some fiat currencies (which is not untrue), the banking system and conventional payment providers deny them such status, citing lack of transparency, potential criminal use, or lack of stability. However, if these criticisms were uncontroversial, Stablecoins would have already perished as victims of their own nature and market distrust, which clearly has not happened. Those who deny their status as money argue that Stablecoins are not guaranteed by a centralised authority, but considering that bank deposit guarantees do not exceed Euro 100,000 per account holder and credit institution, this may not be a decisive argument. Another frequent criticism is price instability, but here too generalisation is not possible; the volatility of Stablecoins depends not so much on the token itself as on the solidity of the issuing platform and the buying and selling pressures it faces; the larger the platform, the lower the volatility. Nor should the depreciation suffered by fiat currencies in the market be overlooked. Take the Japanese Yen as an example: in 2022 one Euro exchanged for 130 Yen, while today it exceeds 180 Yen. To a lesser extent, the U.S. dollar has depreciated by nearly 10% during 2025.
From a purely technical standpoint, it would not be appropriate to consider Stablecoins as legal tender, insofar as they are not issued, regulated, or guaranteed by a centralised monetary authority, nor are they universally recognised as a unit of exchange. This does not mean they cannot be considered an “alternative” unit of payment and collection alongside conventional currency. What will determine their final status is the acceptance and use granted by the market, and especially the confidence of economic operators. In fact, a recent article in the Financial Times warns that over the next five years more than 100,000 Stablecoin payment systems will emerge, which will undoubtedly generate changes in the financial system and the appearance of regulatory legislation. The United States has adopted a decisive and rapid stance toward integrating Stablecoins into its system as a source of demand for Treasury bonds and as a means of maintaining the global prevalence of the U.S. dollar in commercial and financial transactions. Perhaps the European Union and its Member States will recognise the historic opportunity to attract Euro-backed Stablecoins as alternative sources to support their growing debt.
For now, the rapid development of Stablecoins as a form of payment will bring short-term, real-world changes: credit card fees and money-remittance companies may have to adjust their pricing to levels that allow them to compete with the very low costs of Stablecoin payments, or else merchants will progressively migrate to Stablecoin payment platforms, abandoning traditional systems. On the other hand, some banks have taken initiatives such as tokenised deposits (digital representations of assets contained within a distributed blockchain environment, similar to that used by Stablecoins) in order to compete with Stablecoin-issuing platforms. These assets can be used to make online payments, carry out re-mortgaging processes, or settle digital asset transactions. Likewise, JP Morgan already conducts payments using Stablecoins, although daily volumes remain very modest compared to those conducted in fiat currency. In other words, traditional financial operators are already adapting to a future “multi-currency” environment in which conventional fiat currencies will coexist with Stablecoins, driven by market dynamics. Ignoring them will not change this reality.
Eduardo Vilá
Vilá Abogados
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19th of December 2025
