In 1971, the Federal Reserve moved off of the gold standard moving the United States towards a completely cash driven society. Since then, the buying power of the dollar has dropped dramatically - In fact, the US dollar has lost over 96% of its value. That means today's dollar would be worth less than $0.04 cents back in 1913. While you are all distracted with the Epstein files and outcomes of the Diddy’s trial, on July 17th what is being voted on and passed in the shadows by Congress, is the groundwork and infrastructure that's being laid out and properly transitioning our society from cash to digital currency. A cashless society, sounds like a fairytale… doesn’t it? Don’t believe me, look into how stocks are becoming tokenized. Robinhood, a mobile-first financial services platform used for trading stocks, ETFs, options, and cryptocurrency, just announced this within the last few weeks.
When we say stablecoins, what’s the first thing that comes to mind… Something that's stable, something that isn’t volatile, something that’s safe? If your mind drifted towards any of these conclusions you’re on the right track - but allow us to fill in some gaps, to truly help you grasp the value that stablecoins bring to financial services, banking and ultimately our new era of finance that we’re being ushered into.
Stablecoins by definition are a type of cryptocurrency designed to maintain a stable value having been pegged to an asset. When a stablecoin is described as “pegged,” this means its value is designed to remain equal to or closely tied to the value of another asset. The term “peg” refers to a fixed or targeted exchange rate between the stablecoin and the reference asset, ensuring that the stablecoin’s price remains stable relative to the asset.
For example, a dollar-backed stablecoin like USDC, created by Circle Internet Group ($CRCL), is pegged to the US dollar at a 1:1 ratio meaning 1 USDC = $1. With a gold-backed stablecoin like PAXG, this would be pegged to the price of one troy ounce of gold, so 1 PAXG = the market price of one ounce of gold.
Now you might asking yourself, how is the peg maintained? Pegs are maintained through various mechanisms, depending on the type of stablecoin. Stablecoins breaks down into four categories:
1). Fiat-Collateralized 2). Crypto-Collateralized 3). Algorithmic 4). Commodity-Backed
Let’s briefly discuss what each of these mean:
1). Fiat-Collateralized:
These stablecoins, like $USDT (Tether) and $USDC, are backed by a reserve of fiat currency, such as the US dollar, held by a central issuer. For every stablecoin issued, there is an equivalent amount of fiat currency held in reserve, ensuring the stablecoin's value remains pegged to the fiat currency.
2). Crypto-Collateralized:
These stablecoins, like MakerDAO's $DAI, are backed by other cryptocurrencies. They are typically over-collateralized, meaning more cryptocurrency is held in reserve than the value of the stablecoin issued, to account for the volatility of the underlying crypto assets. Users can lock up their cryptocurrency in a smart contract to mint these stablecoins.
3). Algorithmic:
These stablecoins, like TerraUSD ($UST) which has since experienced a complete and total collapse, maintained their peg through algorithms and smart contracts, rather than relying on physical reserves. The algorithm adjusts the supply of the stablecoin based on market demand to keep its value stable. They aim to be decentralized and scalable but have faced challenges in proving long-term stability.
4). Commodity-Backed:
These stablecoins are pegged to the value of a physical commodity, such as Gold or Silver. Each token represents a claim on a physical commodity held in reserve. Examples include stablecoins backed by gold like the PAXG example mentioned earlier in this post.
So why is pegging necessary? Well, imagine using bitcoin or even a bar of gold to purchase an item. If either of the two assets drop 10% during the transaction itself, the seller as a result receives less value, meaning the buyer must spend more to make the deal whole. Long story short, when something is “pegged” it means its tying somethings value to a stable asset like the US dollar to ensure price predictability. This is necessary to make stablecoins practical for transactions of any kind, DeFi and more importantly bridging TradFi to the blockchain.
Let’s discuss why stablecoins are the solution to moving money on-chain. The two biggest reasons (in my opinion) people avoid cryptocurrencies and blockchain technology are because first, they don’t understand it and naturally as human beings we tend to reject things we don’t understand out of insecurity. The second reason is because the banks and media tell them they’re too dangerous, too volatile, and in some cases they are - with memecoins. If you placed $100 into a memecoin Monday, you might wake up Tuesday to $2.37 left in your portfolio. For this reason, you will hear many people in this space repeat phrases like NFA (Not Financial Advice) or DYOR (Do Your Own Research).
Given our memecoin example, why would anyone believe stablecoins, or anything having to do with crypto and something so volatile is the solution to moving money on-chain? By the way, when we say “moving money on-chain” we’re referring to conducting cryptocurrency transactions directly on the blockchain. For example, sending bitcoin from your personal wallet to someone else’s wallet, is an on-chain transaction because the details are recorded on the blockchain - forever. Moving money on-chain implies leveraging the core features of blockchain technology to securely and transparently record cryptocurrency transactions between parties, without the need for traditional financial intermediaries, to be placed directly onto the blockchains distributed ledger.
Stablecoins are the preferred solution for moving money on-chain because they have the capability to combine the benefits of blockchain technology with price stability. By pegging to stable assets like the US dollar, stablecoins can avoid the extremely volatile price swings of cryptocurrencies from Bitcoin, making them much more reliable. On top of this, blockchain transactions that utilize stablecoins settle much faster, oftentimes within minutes or even seconds. Compare this to your traditional approach in using a bank, which can take days, especially for cross-border payments. Stablecoins can even reduce transaction fees by simply bypassing intermediaries like banks or payment processors. Stablecoins are also accessible for unbanked and underserved populations breaking down barriers to entry, allowing anyone with internet access to participate in the new era of digital economy. However, internet connectivity is an even bigger issue here… reference our last post for more details about Global Network Connectivity in Crypto.
To reiterate, let’s review the reasons stablecoins have been chosen as the solution for moving money on-chain:
- Price Stability: Pegged to stable assets (e.g., USD) to avoid volatile price swings seen in cryptocurrencies like Bitcoin.
- Fast Settlement: Transactions settle within minutes or seconds, much faster than traditional banking systems.
- Lower Transaction Fees: Reduced costs by bypassing intermediaries like banks and payment processors.
- Financial Inclusion: Accessible to unbanked and underserved populations, enabling broader participation in the digital economy.
While stablecoins are such a transformative piece to bridging TradFi to DeFi, they’re also susceptible to misuse in illicit finance due to their global reach and ease of accessibility. In 2024 alone, Chainalysis estimates that approximately $25-32B, yes that’s Billion with a “B” in stablecoins were received by illicit actors, and accounted for 12-16% of the total stablecoin market cap. Common uses include money laundering, evading sanctions, and even fraud. To make matters worse, the pseudonymity in crypto provides a layer of privacy that can hide a user’s real identity and their on-chain activity which can make stablecoins a very attractive place to start. Take Tether for example, TRM Labs estimates Tether (USDT) was linked to $19.3 billion of illicit transactions in 2023 alone, which was a decrease from $24.7 billion in the previous year. Originally, cryptocurrencies were and still are considered a black market until regulators in the United States actually start passing laws and guidelines for this space. I remember my first fake ID was even purchased using bitcoin back in 2013 - imagine if I would have held onto that :’( back then, and to be honest now, IT STILL IS the Wild West until regulators step in. Those of us that understand how it all works, and I mean truly understand its power move through life like water leveraging digital banking as the backbone to our daily lives. Truth is, we’ve got to enjoy it while we can because they are beginning to step in and draft legislation like the GENIUS bill which we’ll get to in a minute.
(This next paragraph was added, July19th after the official passing of the Genius Bill)
Random and somewhat alarming fact to point out, did you know that in a rush to pass the GENIUS bill, lawmakers who gave the American people their word that CBDC’s would never become possible, now have the freedom to create CBDC's, which for those who don't understand will legally have the right to step in and remove your money off of exchanges without your permission. It’s clear that lawmakers have seemingly gone back on their word and in an effort to get this legislation passed, and from my understanding they removed what was previously listed in the bill as a ban on CDBC’s. Meaning, our future system now enables CBDC’s the power to play the judge, jury and the executioner of your wealth in a complete an utter invasion of our privacy in this new system of finance. It’s important to identify these notable changes as they take place behind closed doors, crypto was once viewed as a tool for becoming financially free from the archaic and traditional financial system that has kept, and continues to keep millions of people trapped - and is now quietly becoming regulated completely turning the ethos, the ideology and original fundamentals of the space completely upside down.
You never once thought the government would have the power to step in and shut down your businesses, close your schools, churches, trap you inside your homes, and force entire societies to stay indoors, but we watched them do this in plain sight with the introduction of COVID into our lives. Don't let CBDC's have control of your finances, tread carefully in this space. If you owe money to any official bank or institution, I'll bet they now have the power to simply go into your digital wallets and seize your money against your will. But that’s for another post… let’s dive back into stablecoins!
Dollar-backed vs. Gold-backed stabelcoins:
Examples of Dollar-backed stablecoins include $USDT, $USDC, B$USD, etc.
Pros:
- Widespread adoption, high liquidity
- Highly integrated
Cons:
- Dependence on issuer solvency
- Regulatory scrutiny
Examples of Gold-backed stablecoins include Tether Gold, PAXG, etc.
Pros:
- Hedge against inflation
- Another option for investors seeking tangible asset-backed tokens
Cons:
- Lower liquidity
- Storage & Custody costs may impact stability
- Less integration capabilities
So do stablecoins really need regulation, and why is the US government stepping in with the Genius bill? Truth is, stablecoins do require a great deal of regulation due to their rapid growth and potential risks to financial stability, consumer protection and illicit finance prevention. Inadequate or mismanaged reserves can lead to a de-pegging, as seen in TerraUSD’s $45 billion collapse in 2022. Stablecoins integration with TradFi at such an early stage could also amplify any financial shocks if issuers fail. Not to mention their role in money laundering and sanctions evasion requires AML compliance.
The GENIUS Act, was passed by the US Senate on June 17th, 2025 and is currently pending with the House, the GENIUS Act establishes a federal regulatory framework for dollar-backed stabelcoins which aims to legitimize them, and further promote US dollar dominance, and foster innovation.
Some Key Rules (so far, not official yet):
- Requires issuers to hold 100% reserves in low-risk, liquid assets (e.g., cash, Treasury bills).
- Mandates regular audits and transparency disclosures.
- Allows dual state and federal licensing, with state standards needing to be “substantially similar” to federal ones.
- Strengthens AML and counter-terrorism financing rules.
Once the GENIUS bill is passed, this will provide clarity for issuers and encourage the likes of banks and even FinTech corporations to participate. Funny thing about this is other jurisdictions like EU, Singapore, and Hong Kong have all implemented or officially proposed strict stable coin regulations, emphasizing reserves, transparency, and AML compliance. The longer this bill sits on Trumps desk, the further the US risks falling behind in the war of digital economies. It is also important to note this is the first time, to my knowledge that we’re seeing financial and economic warfare being used as leverage in an effort to secure better trade deals, which are ongoing as of today July 10th, 2025.
Now onto Circle and Cardano. $USDC, issued by Circle, is a dollar-backed stable coin with a market cap exceeding $58 billion, at this time. It’s also readily available on multiple blockchains, including Cardano. $USDC is integrated with Cardano to enable fast, low-cost transactions within its ecosystem. This allows users on the Cardano blockchain to leverage $USDC for DeFi applications, payments, and even cross-chain settlements that will benefit from Cardano’s energy and cost efficient blockchain. Cardano supports stablecoins like $USDC and $DJED (a Cardano-native algorithmic stablecoin) to facilitate on-chain transactions and DeFi growth. While Cardano’s enhanced security in comparison to other blockchains presents itself as an ideal and reliable platforms for stable coin deployment, adoption lags far behind other blockchains like Ethereum and Solana. All this to say, Cardano’s stablecoin ecosystem is still developing, and its success depends on broader adoption and increased regulatory clarity from US lawmakers.
If there’s anything you need to take away from this, it’s that stablecoins are pivotal in bridging traditional finance and blockchain, offering stability for on-chain transactions but they still face challenges like illicit use and reserve risks. If you’re an active trader, stablecoins are your friends they present a safe haven for you to place your funds without having to worry about price volatility. Stablecoins are also ironically the trojan horse for banks to finally begin understanding the value in leveraging DeFi. They’re still a few steps behind, and those of us that DO understand it won’t hold it against them because this just means more fun for us in the meantime. If you haven’t experimented yet, do yourself a favor and go to AAVE or any other lending DeFi application and you’ll quickly see how valuable stablecoins can be in borrowing, lending, and your every day lives.