Stablecoins Explained: The Digital Dollar Reshaping Global Payments

Key Takeaways

What Are Stablecoins?

Most cryptocurrencies move in price constantly. That volatility can make them exciting investment opportunities, but awkward for everyday payments. Stablecoins solve that problem by pegging their value to something predictable, usually the US dollar.

One USDC (USD Coin) is designed to always be worth one US dollar. One USDT (Tether) works the same way. The issuer holds real dollars or dollar-equivalent assets, such as short-term government bonds, in reserve to back every token in circulation. Think of it like a digital voucher, you exchange a dollar for a token, the token travels wherever you send it on a blockchain, and the person on the other end can redeem it for a dollar. The blockchain is just the rail the voucher moves on.

Stablecoins have been around since 2014, but over the past few years they have pushed into the mainstream. Total stablecoin supply reached around AUD $450+ billion ($300 billion USD) in 2026. Transaction volume also reached AUD $52.8 trillion ($33 trillion USD), roughly 20 times the annual volume processed by PayPal.

Stablecoin growth over time (source)

Why People Use Them

The most common use case is moving money across borders. A traditional international bank transfer can take two to five business days and typically carries poor exchange rates plus flat fees on top. A stablecoin transfer settles in seconds and costs fractions of a cent on most blockchains. That difference matters in places where workers send wages home every week.

Stablecoins are also useful as a store of value in countries where the local currency is losing purchasing power quickly. In Venezuela and Argentina, accessing US dollars through formal financial channels is difficult or restricted, but holding USDT on a phone is not. Stablecoin adoption has grown fastest in emerging markets, where the gap between what the financial system offers and what people actually need is widest.

For businesses, the appeal is settlement speed. JPMorgan extended its JPM Coin to public blockchains in late 2025, letting corporate clients settle payments around the clock, including on weekends when traditional banking systems are closed.

The USDC and USDT Duopoly (And What Else Exists)

Two stablecoins dominate the market. Tether (USDT) is the largest by supply and handles a significant share of global transfer volume, particularly in Asia and emerging markets. USD Coin (USDC), issued by Circle, has become a leading stablecoin in regulated markets and the preferred option in compliance, especially in the European Union where stricter rules have pushed exchanges toward fully compliant options.

Stablecoin issuers (source)

AUD-backed stablecoins do exist. AUDD, issued by AUDC Pty Ltd, is deployed on multiple global public blockchains. These tokens work the same way as USDT or USDC but are pegged to the Australian dollar rather than the US dollar. Adoption remains limited compared to USD-backed equivalents. The global dominance of the US dollar means most cross-border stablecoin activity defaults to USD-pegged assets, and AUD stablecoins have not yet found significant traction beyond domestic use cases.

Regulation Is Catching Up

Governments around the world are now writing formal rules for stablecoins. In the US, the GENIUS Act, which takes effect in early 2027, will require stablecoin issuers to hold 1:1 reserves in high-quality liquid assets, including cash, short-term government bonds, bank deposits, repurchase agreements, and qualifying money market funds, and to publish monthly reserve disclosures and meet know-your-customer and anti-money-laundering standards. Issuance will be restricted to approved entities like banks and licensed nonbanks.

“Stablecoins represent a revolution in digital finance. The dollar now has an internet-native payment rail that is fast, frictionless, and free of middlemen. This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for US Treasuries, which back stablecoins.”

Scott Bessent U.S. Secretary of the Treasury, July 18, 2025

The US granted conditional approval for five national trust bank charters linked to digital assets, bringing Circle, Paxos, BitGo, and Ripple into the federal banking system. That move reflects a broader shift in stablecoin infrastructure, which is increasingly treated as financial infrastructure rather than a crypto experiment.

Opportunities and Risks

Financial institutions have spent decades building payment infrastructure that is expensive, slow, and out of reach for billions of people. Stablecoins offer a cheaper, faster alternative that runs on open networks and requires no bank account to use. With the majority of financial institutions now taking some form of action on stablecoins, from live deployments through to early-stage planning, the question is no longer whether stablecoins will be integrated into mainstream finance but how quickly.

Programmable payments are an emerging frontier. New protocols allow stablecoins to settle automatically when specific conditions are met, paying for cloud computing, data feeds, or supply chain milestones without human intervention.

Algorithmic stablecoins, which use code rather than actual reserves to maintain their peg, have failed before. TerraUSD collapsed in 2022, wiping out tens of billions of dollars in value within days. That event is why about 98-99% of stablecoin supply by market cap is now asset-backed rather than algorithmic. Even asset-backed stablecoins carry reserve risk if the issuer holds low-quality assets or misrepresents their holdings. Regulatory fragmentation is another challenge, with different rules across regions creating friction for global issuers and potentially resulting in stablecoins that are compliant in one market but restricted in another.

Summary

Stablecoins have moved from a niche crypto tool to a working piece of global financial infrastructure. The volume figures make that case plainly: trillions of dollars moving daily, at near-zero cost, across borders that traditional banks still struggle to cross efficiently.

For Australians, the key detail is that this market runs almost entirely on US dollars. AUD stablecoins are developing, but USD-pegged assets dominate cross-border activity by a wide margin, and that is unlikely to shift quickly given the scale of existing USD-denominated stablecoin use.