The Rise of Stablecoins: An Overview
The stablecoin sector is experiencing rapid growth, drawing significant public interest. In response to the increasing curiosity surrounding these cryptocurrencies, the editorial team at Happy Coin News has addressed the most pertinent inquiries regarding stablecoins.
Understanding Stablecoins
A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging its price to another asset, such as a fiat currency or a commodity. For instance, 1 USD Coin (USDC) maintains a value of $1, while 1 Tether Gold (XAUt) is equivalent to one ounce of gold. However, it is important to note that the exchange rates of stablecoins can fluctuate slightly due to variations in demand, with typical price deviations not exceeding 1%. For example, 1 USDC may occasionally be available for $0.99, while 1 XAUt was recorded at $3,400, despite the market price for an ounce of gold being $3,395.
Leading Stablecoins by Market Capitalization
Stablecoins can be categorized based on the mechanisms that ensure their price stability, which includes fiat-backed, commodity-backed, cryptocurrency-backed, and algorithmic stablecoins. Fiat stablecoins are backed by actual fiat currency or government bonds. For example, Techteryx, the issuer of TrueUSD (TUSD), secures its coins by holding dollars in its reserves. Commodity stablecoins are tied to physical assets such as precious metals or oil, with the Petro (PTR) from Venezuela, which became defunct in 2024, being a notable example. Gold-backed stablecoins like Pax Gold (PAXG) are created by companies like Paxos, which purchases gold in exchange for the tokens it issues. Cryptocurrency-backed stablecoins derive their value from reserves of digital assets, such as MakerDAO’s Dai (DAI), which is backed by Ethereum and USDC. Algorithmic stablecoins rely on algorithms and smart contracts to maintain their price stability by adjusting the circulating supply. For instance, if the price of Ampleforth (AMPL) increases, the supply in wallets increases accordingly; conversely, if the price drops, the total supply decreases.
Assessing the Risks of Stablecoins
Stablecoins categorized as fiat, commodity, or crypto-backed are generally seen as secure, provided their issuers undergo regular audits. For instance, Tether is known to hold 644 gold bars in Switzerland, weighing nearly 7,668 kilograms. Hence, selecting stablecoins from reputable companies can mitigate the risk to one’s investments. However, algorithmic stablecoins often face challenges; for example, fluctuations in the supply of Ampleforth coins have failed to stabilize its price consistently at $1, causing it to rise to $1.50 or fall to $1 instead. The most notable case of algorithmic stablecoin failure was TerraUSD (UST), which once boasted a $2 billion market cap before plummeting to $0.01359 in May 2022, following a mass sell-off by holders.
Use Cases for Stablecoins
Stablecoins have gained traction for their versatility, including uses such as purchasing other cryptocurrencies, making payments for goods and services, facilitating domestic and international money transfers, and generating passive income. Following the imposition of economic sanctions against Russia, stablecoins became a popular option for trading digital assets, particularly as access to international exchanges for the ruble diminished. Consequently, Russians began utilizing stablecoins like Tether (USDT) for cross-border transactions. Furthermore, users can earn interest by locking up stablecoins on various centralized and decentralized platforms, with yields typically reaching up to 10% annually. Some platforms, such as HTX, have offered even higher returns, with promotional rates reaching 20% for certain stablecoins.
The Emergence of the A7A5 Ruble Stablecoin
The A7A5 stablecoin, launched in January 2025, quickly gained traction, achieving a turnover of $9.3 billion within its first four months and a market capitalization exceeding ₽41 billion. A substantial portion of transactions involving A7A5 occurs on crypto exchanges, particularly Grinex, where users convert ruble-based stablecoins into USDT. Leonid Shumakov, the A7A5 project lead, has described the stablecoin as a bridge facilitating secure transitions to USDT, indicating that it is primarily used for acquiring dollar-pegged stablecoins.
Regulatory Environment for Stablecoins in Russia
The legal framework in Russia poses challenges for stablecoins, particularly those issued by foreign entities, which are classified as foreign digital rights. Only qualified investors with legal entity status can purchase these assets, and many approved companies are prohibited from acquiring popular stablecoins due to regulatory criteria. For instance, USDT is issued by Tether, which secures its value with assets from the United States, deemed unfriendly by the Russian government. In contrast, the A7A5 stablecoin, issued by the Kyrgyz firm Old Vector and backed by ruble deposits in Russian banks, is permitted in Russia. However, current regulations prevent the use of A7A5 and similar stablecoins for transactions involving goods and services. At present, purchasing stablecoins and conducting legal transactions poses no legal repercussions, but future legislation in 2026 could impose fines of up to ₽1 million for using digital currencies as payment. If enacted, this law could also affect employers who compensate staff in stablecoins like USDT.
Future Outlook for Stablecoins
Recent regulatory developments in the United States and Hong Kong have fostered a positive outlook for the stablecoin market. In light of these changes, experts at JPMorgan Bank anticipate a threefold increase in the market capitalization of dollar-pegged stablecoins by the end of 2028, projecting a total value of $813 billion in circulation. Furthermore, analysts from Standard Chartered have proposed an even more optimistic scenario, suggesting that stablecoin market capitalization could soar to $2 trillion within the next three years.
