The con starts with the name. Stablecoin. Two words glued together that promise the moon and the stars, as the kids say. Stable? Coin? Let’s take apart this piece of semantic engineering that keeps $251bn spinning¹.

Let’s start with the basics. In the crypto world, a “coin” is a native currency that has its own sovereign blockchain.

Bitcoin (BTC) runs on the Bitcoin blockchain: a distributed ledger, a kind of giant accounting book shared between thousands of computers that validate and record every transaction. Ether (ETH) is the native coin of the Ethereum blockchain. Beware a common mix-up: Ethereum is the blockchain; Ether is the currency. In the same way

• SOL runs on the Solana blockchain;
• AVAX is Avalanche’s coin;
• BNB is the coin of Binance’s BNB Chain (formerly Binance Smart Chain), and so on.

Each coin = its own protocol, its own validators, its own consensus rules.
It’s sovereign.
Independent.

Stablecoins? Well… they aren’t coins. They are tokens, digital squatters with no blockchain of their own, so to speak. USDT and USDC are ERC-20 tokens when they circulate on Ethereum, TRC-20 on Tron, SPL on Solana. Never mind the jargon, let’s just say they run on a blockchain that is independent of them.

The analogy is simple. The blockchain is the operating system: Windows, Linux, macOS. The native coin is the licence that runs the OS. The tokens? Apps installed on top. They depend on the OS to exist.

💡 Stablecoins are created via smart contracts. For example, Circle deploys a contract on Ethereum that says: “Here are the rules of USDC, here is how they are created, here is how they are transferred.” And to keep it simple, a smart contract is autonomous code that executes automatically: if X sends 100 tokens to Y, the contract transfers ownership. No middleman.

If Ethereum suffers a critical failure, such as a consensus flaw or a major bug, every contract and token that depends on it can be paralysed or affected.
In practice, Ethereum suffers congestion and fee spikes rather than real crashes.

To lighten the load, secondary layers such as Arbitrum, Optimism or Polygon process transactions outside the main layer, bundle them, then submit data or proofs to Ethereum. That speeds up transactions and lowers the unit cost. But it also introduces a dependency, since security and finality remain tied to the main layer and the cost of publishing on Ethereum is passed on.

Now let’s talk about this famous stability. The technical term is the “peg”, the anchor to the dollar. One USDC must always be worth $1. When that stops being true, it’s called a “depeg”. And contrary to what issuers (and some professionals) would have you believe, depegs are frequent.

But first, let’s distinguish two types. Most stablecoins (USDT, USDC) are “collateralised”: they claim to hold $1 (or equivalent) in reserves for every token issued. Others, like the late TerraUSD (UST), were “algorithmic”: they used complex mint/burn mechanisms to hold the peg, with no real reserves. When it collapsed in May 2022, UST went from $1 to $0.02 in a few days. $40bn of value evaporated². Its founder Do Kwon, on the run, was arrested in Montenegro with fake Costa Rican passports.

That said, even collateralised stablecoins, supposedly safer because they are backed by reserves, depend entirely on trust in their centralised issuer.

• March 2020: the Covid crash, DAI, the “decentralised” stablecoin of MakerDAO, touched $0.90
• June 2022: Justin Sun’s USDD fell to $0.97.
• March 2023: USDC drops to $0.87 when Silicon Valley Bank, where Circle kept $3.3bn, goes bust. Widespread panic. In 48 hours, $8bn flees USDC.
• FEI depegged to $0.70 shortly after its launch. Even the smaller ones like HUSD, GUSD or USDP have all had episodes where their value drifted significantly away from the dollar.
• And above all, Tether’s USDT, the most liquid of them all with its $95bn market cap, has had several depegs: $0.95 in October 2018 amid rumours about its reserves, $0.97 in May 2022 during the Terra collapse, $0.96 in November 2022 after the fall of FTX.

The promised absolute stability? A myth.

And yet the current figures are dizzying. $251bn of market cap. More than Germany’s Treasury holdings³. 90% of crypto volumes go through these tokens⁴. No surprise: nobody wants to pay for their coffee with a Bitcoin that can lose 10% while the machine makes the cappuccino. Or the other way round, for the seller.

But who really holds these mountains of digital dollars? Not the small investor who dreamed of decentralisation. The ECB did the maths: 80 to 90% sit with millionaire addresses. Jump Trading holds $10bn worth⁵. Wintermute, $2.8bn. On Ethereum, 100 addresses control 45% of all USDC in circulation⁶. Stablecoins aren’t exactly the people’s money.

This concentration of power comes from a business model of perverse elegance.

Tether Limited, tucked away in the British Virgin Islands, claims to keep one dollar for every USDT issued, while admitting that less than half of its reserves are in high-quality liquid assets⁷. Circle plays the Boston respectability card: since 2022, BlackRock (now) manages part of its reserves, and Bank of New York Mellon, America’s oldest bank, Alexander Hamilton’s bank, holds the funds. Circle has literally plugged itself into Wall Street’s aorta.

You give them $1,000, they create 1,000 tokens and park your dollars in US Treasury bills. The interest? Theirs. Tether rakes in $4.2bn in annual profit with just 100 employees. Do the maths: $42M of profit per head⁸. Goldman Sachs? $1.3M per employee. Apple? $2.4M. Tether has become the most profitable company per employee on the planet. Seigniorage, the age-old privilege of creating money, privatised by an offshore outfit.

And as if capturing this monumental rent were not enough, they claim an even more troubling power: censoring transactions as they see fit. The USDC smart contract contains a “blacklist” function. Circle can make the tokens at a specific address unusable. Same for Tether. They have done it hundreds of times, often at the request of US authorities. In August 2022, Circle froze the USDC linked to the Tornado Cash mixer⁹. Legitimate users found themselves locked out.

But the impact goes beyond the cryptosphere, and stablecoins also find a use in times of instability. Because while some cryptos wanted to meet that need, what people are really after is the stability of the dollar.

Buenos Aires, 2023. In the cafés of Palermo, nobody talks in pesos any more. Too volatile, with 140% inflation. People count in USDT. $50M changes hands every day on WhatsApp and Telegram, a parallel economy breathing to the rhythm of Tether Limited¹⁰.

Lagos. USDT trades at a 5% premium to the official dollar. Nigeria, Africa’s largest economy, runs on a currency issued from the Virgin Islands.

It is wildcat dollarisation, but orchestrated by opaque private companies rather than by the US Treasury. Local central banks look on, powerless, as their currencies get devoured by private tokens.

We have seen this dollarisation by private companies before¹¹. The 19th century, the United States, the era of “Wildcat Banking”: private currencies everywhere, cascading failures, until the state took back control. Today, we are replaying the same tragedy with AWS servers instead of vaults and ERC-20 tokens instead of banknotes.

The paradox is striking.

Especially since this is only the beginning. The $250bn of stablecoins in circulation are buying up US debt on a massive scale¹², indirectly funding US deficits. The BIS¹³ measured the phenomenon in 2025: when $10bn flows into stablecoins, T-bill yields shiver¹⁴, squeezed by 2 to 5 basis points. Like a butterfly flapping its wings in the metaverse and rattling the trading floors of New York.

The Web3 that promised a revolutionary alternative has ended up as the US Treasury’s most loyal customer¹⁵, through stablecoins that pile up contradictions the way others pile up shitcoins.

The new monetary world looks strangely like the old one. With more technical complexity and fewer institutional guarantees.