What Is a Stablecoin in Plain English: USDT, USDC and the Risks in 2026

In brief: a stablecoin is a cryptocurrency whose price is pegged to a stable asset, most often the US dollar. One USDT or USDC is designed to always be worth about one dollar. These tokens are not meant for profiting from price growth; they serve as a unit of account inside the crypto market: traders lock in profits in them, move money between platforms and park funds between trades. The peg is held in place by the issuer's reserves, and that is exactly where the main risk lies.

How the peg works

Bitcoin's price is set purely by the balance of supply and demand and can move 5–10% in a day. A stablecoin solves a different problem: preserving purchasing power. The mechanics depend on the type of collateral.

• Fiat-backed. The issuer takes in dollars, issues an equivalent number of tokens and holds the reserve in US Treasury bills, deposits and cash equivalents. Redemption works both ways: a large client can return tokens to the issuer and receive dollars. It is this arbitrage opportunity, buying a token for $0.99 and redeeming it for $1, that pulls the price back to parity. USDT, USDC, PYUSD and USDG work this way.
• Crypto-backed. The collateral is not dollars but crypto assets locked in a smart contract, and it is overcollateralized: to issue $100 worth of tokens, you have to lock up $150 or more in cryptocurrency. DAI is the example. The upside is transparency and no banking intermediary; the downside is vulnerability to sharp market crashes.
• Algorithmic. The peg is maintained not by reserves but by a mechanism that mints and burns a paired token. Historically this is the most fragile design: the collapse of UST and the LUNA token in May 2022 wiped out roughly $40 billion in value within days. Today such projects hold only a small share of the market.
• Commodity-backed. Pegged not to a currency but to a gram of gold or another commodity. Strictly speaking they cannot be called stable, since they inherit the volatility of the underlying asset.

The stablecoin market as of 14 September 2026

According to CoinGecko, this is how things stood on 14 September 2026.

For comparison, the total capitalization of the entire crypto market on the same day was about $2.65 trillion, with bitcoin at about $1.56 trillion. In other words, the two largest stablecoins account for roughly one in every ten dollars in the crypto economy excluding BTC.

USDT vs USDC: what is the difference

The key practical takeaway: USDT wins on liquidity and reach, USDC on reserve transparency. Both issuers are technically able to freeze funds at a specific address; this is a built-in contract function that they regularly use at the request of law enforcement agencies. A stablecoin is not an anonymous asset.

Networks and fees: why this matters more than the choice of token

The same USDT exists on dozens of blockchains, and this is the most common way newcomers lose money. Sending on a network the recipient does not support usually means the funds are lost for good.

• TRC-20 (Tron) is the cheapest and most widely used network for USDT transfers; the fee is usually a few dollars or less.
• ERC-20 (Ethereum) is the most "institutional" network, but the fee depends on network congestion and can be several times higher.
• BEP-20, Solana, TON, Arbitrum are cheap alternatives; support depends on the specific platform.

The rule: first confirm which networks the recipient accepts, then choose the sending network, then make a test transfer for the minimum amount. More on storage and transfers in How to store cryptocurrency.

What stablecoins are used for in practice

1. Locking in a result without cashing out to fiat. Sold bitcoin for USDT and you are out of the volatility without moving money to a bank.
2. Transfers between platforms. Sending USDT from one exchange to another is faster and cheaper than pushing fiat through the banking system.
3. Unit of account in DeFi. Loans, collateral and liquidity pools are denominated mostly in stablecoins.
4. Cross-border business payments. Under Russia's Law 282-FZ, settlements in digital currency are permitted in foreign trade contracts between residents and non-residents, one of the four exceptions to the general ban on paying with cryptocurrency.

What a stablecoin does not do: it does not generate income on its own. The 8–20% annual yields "on stablecoins" that platforms advertise are not a property of the token; they are payment for the credit risk of a specific protocol or platform that you take on.

Stablecoins and Russian regulation

On 11 August 2026, the Bank of Russia (the central bank) published a draft ordinance defining the list of cryptocurrencies admitted to public trading on exchanges: Bitcoin, Ethereum and Tether USDT. The selection criteria are market capitalization, average daily trading volume and at least five years of pricing history on foreign platforms. USDT is the only stablecoin on the list.

It is important not to confuse two instruments: a stablecoin is issued by a private company against its own reserves, while the digital ruble is a liability of the Bank of Russia, the third form of the national currency. From the standpoint of Law 282-FZ, a stablecoin remains a digital currency, that is, property, not a means of payment inside the country.

There is also a tax nuance that people forget: swapping bitcoin for USDT is a disposal of property, which is formally a taxable event even if you never received any rubles. Details in Cryptocurrency tax for individuals.

Risks worth knowing about

• Depeg, the loss of the peg. Even the largest tokens see short-term deviations: in March 2023, USDC dropped below $0.88 because part of Circle's reserves was held at the failed Silicon Valley Bank, and it regained parity only after the decision to protect the bank's depositors.
• Quality and structure of reserves. An attestation by an accounting firm is not a full audit. It is worth checking what share of the reserves is in short-term Treasury bills and what share is in less liquid assets and secured loans.
• Bank run. In a mass simultaneous redemption, the issuer may not be able to sell off reserves without losses in time.
• Address freezing. The issuer is technically capable of blocking your tokens. For a law-abiding user the probability is small, but the risk is structural, not hypothetical.
• Regulatory risk. The rules change quickly: MiCA is in force in the EU, Law 282-FZ in Russia. A token available today may drop off the list of admitted assets tomorrow.
• Wrong network on a transfer. The most common everyday cause of real losses.

FAQ

Can a stablecoin fall to zero? For fiat-backed tokens, that scenario requires the complete destruction of the reserves, which is unlikely but not impossible. For algorithmic models it has already happened: UST in May 2022.

USDT or USDC: which to choose? For trading and transfers, USDT is more practical because of its liquidity; for holding a large sum over a long period, many prefer USDC because of its stricter reserve disclosure. A sensible compromise is not to keep everything with one issuer.

Are stablecoins legal in Russia? Owning and exchanging them, yes: cryptocurrency is recognized as property. Paying with them inside the country, no, except for the four exceptions under Law 282-FZ, including foreign trade contracts.

What is a depeg and how do you spot it? A price deviation from $1 of more than a few tenths of a percent, especially a persistent one. The easiest way to track it is the token's price on a major exchange and the spread between different platforms.

Do I have to pay tax if I keep my money in USDT? Holding by itself creates no tax. A taxable event arises on an exchange or sale.

How does a stablecoin differ from the digital ruble? In the issuer and the nature of the obligation: the digital ruble is issued by the Bank of Russia and is legal tender; a stablecoin is issued by a private company and inside Russia remains property, not money.

Can you earn money with stablecoins? Only by taking on additional risk, by placing them in lending protocols or on platforms. The token itself by definition does not grow; its job is to stay put. On assessing the risks of such strategies, see Trading for beginners.

Sources

• GARANT.RU, 11 August 2026. "The Bank of Russia has drafted rules for cryptocurrency purchases by non-qualified investors" — https://www.garant.ru/news/2199830/
• iXBT, 11 August 2026. "Three cryptocurrencies and a 300,000 limit: the Bank of Russia sets the rules for investors" — https://www.ixbt.com/news/2026/08/11/427580-tri-kriptovaliuty-i-limit-300-tysiac-cb-opredelil-pravila-dlia-investorov.html
• GARANT.RU, 18 August 2026. "Cryptocurrency: new rules for investors and business from 1 September 2026" — https://www.garant.ru/article/2204420/
• vc.ru. "Stablecoins in 2026: how USDT differs from USDC and why it matters" — https://vc.ru/crypto/3064746-stejblkoiny-usdt-i-usdc-klyuchevye-otlichiya
• Prices and market capitalization as of 14 September 2026 — CoinGecko data