There’s a new kind of money spreading across the internet, and it doesn’t come from any government. It’s called a stablecoin, and while it’s supposed to be worth exactly one dollar, it lives in a lightly regulated corner of the crypto world. What started as a niche tool for crypto traders has now ballooned into a roughly $300 billion market, and it’s moving fast into everyday finance.
A Dollar That Is Not Really a Dollar
Stablecoins let people buy things online, send money abroad, and move cash between investments with minimal fees. Hundreds of versions now exist, and more are on the way. The Trump family launched its own stablecoin this year. Walmart has explored issuing one. Major banks, tech companies, and payment firms are circling too. As adoption grows, so do concerns about what happens when something goes wrong.
At a basic level, stablecoins work like this: you buy them through a crypto exchange using dollars, store them in a digital wallet, and use them for fast, low cost transactions anywhere in the world. Unlike credit card payments, stablecoin transactions often skip fraud checks and foreign exchange fees, which makes them attractive to merchants. Payment platforms like Shopify have already enabled stablecoin checkout, bringing crypto one step closer to the mainstream.
Banking Without the Bank Stuff
Until recently, stablecoins were mostly used to trade other cryptocurrencies or place speculative bets. That changed after new rules, including the GENIUS Act signed by President Trump, effectively opened the door for stablecoins to be used in traditional payments and banking. Industry leaders say many consumers may soon use stablecoins without realizing it, as apps quietly convert dollars into digital tokens behind the scenes.
That lack of transparency worries consumer advocates. Stablecoins don’t come with federal deposit insurance. There are no guaranteed fraud protections. And unlike a bank account, holders don’t always have a clear legal right to redeem their tokens directly with the issuer for full value. Critics argue stablecoin companies get many of the benefits of banks without the responsibilities, drawing comparisons to the 19th century era when private bank currencies frequently collapsed.
Bad actors have also taken notice. US authorities have linked stablecoins to terrorist financing, sanctions evasion, and illegal marketplaces. Issuers like Tether say blockchain transactions are traceable and that they cooperate with law enforcement, but regulators warn the system remains vulnerable to abuse.
Crypto Stress Does Not Stay Contained
The risks go beyond crime. Stablecoin issuers back their coins by investing customer funds, often in Treasury bills. Tether and Circle together hold roughly $136 billion in T bills, putting them among the world’s largest buyers. If investors rush to cash out during a crypto downturn, issuers could be forced to sell Treasurys quickly, potentially spilling stress into the broader financial system.
That danger cuts both ways. When Silicon Valley Bank collapsed in 2023, Circle had $3.3 billion stuck in the failed bank. Its stablecoin briefly fell to 87 cents, triggering panic across crypto markets. The crisis ended only after regulators guaranteed bank deposits. Stablecoin holders, unlike bank customers, had no safety net.
Despite the risks, momentum keeps building. Weekly trading volumes now exceed $2 billion, and the Federal Reserve estimates the stablecoin market could reach $3 trillion within five years. Big players are moving in. Visa is expanding stablecoin payments, Robinhood Markets $HOOD has rolled out prediction market features tied to crypto rails, and financial giants are experimenting with their own offerings.
Supporters say stablecoins represent a faster, cheaper financial system. Critics say they hand enormous power to lightly regulated firms while exposing everyday users to risks they may not understand. Either way, stablecoins are no longer a crypto sideshow. They’re moving into the financial mainstream, quietly, quickly, and with very real consequences if something breaks.