Stablecoins are cryptocurrencies that aim to hold a steady value, usually by tracking a traditional currency such as the US dollar. Examples aim to stay close to $1 each. People use them to move value between platforms or to hold a less volatile balance within crypto.
How they try to stay stable
Different stablecoins use different methods — some claim to be backed by reserves of cash and other assets, others use more complex mechanisms. The word “stable” describes the goal, not a guarantee.
Important risks
- A stablecoin can lose its peg and fall below its target value.
- Backing and reserves vary and are not always fully transparent.
- They carry the same broad risks as other crypto and are not protected like bank deposits.
Crypto is high risk and largely unregulated in the UK. You could lose all the money you invest, and most crypto is not protected by the FSCS or the Financial Ombudsman Service. This is educational information only, not financial advice. Only invest what you can afford to lose.