Crypto · 2 MIN READ
Stablecoins: what does “stable” really mean?
Price targets, backing assets and why a peg should never be mistaken for a guarantee.
A stablecoin is a digital token designed to track a reference value, often a national currency. A dollar-linked token, for example, aims to remain close to one US dollar. That is a design objective, not proof that its market price can never change.
How a price target is supported
Many issuers hold reserve assets intended to support their tokens. The composition of those reserves, who controls them and how redemption works are central to understanding the arrangement. Other designs use crypto collateral or algorithmic mechanisms, so the label alone does not tell the whole story.
A token is not a bank deposit
A balance displayed in a wallet is not automatically equivalent to cash in a bank account. The holder’s rights, the issuer’s obligations and any protections depend on the actual product and its legal setting. A familiar currency symbol does not establish deposit protection.
What a depeg means
A depeg happens when the traded price moves away from its intended reference. Concerns about backing, access to redemption or market liquidity can affect confidence. Even when a token later returns towards its target, a user who needed to transact during the disruption may have faced a different price.
Stablecoins can connect blockchain applications with currency-denominated accounting. Evaluating that role requires looking beyond the name: the backing, redemption process and technical infrastructure each introduce a separate question.
Further reading
Bank of England — What are stablecoins?
Ethereum.org — Stablecoins
