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In the first months of 2025, stablecoins have experienced a significant surge in popularity – despite the fact that the concept was first implemented over a decade ago with the launch of Tether. The growing attention of regulatory authorities across multiple jurisdictions is a clear indicator of the rapid evolution of the decentralised finance (DeFi) sector, driven by the continued digitalisation of global capital markets. It is only through recent regulatory efforts that a binding and consistent definition of “stablecoin” has emerged.

Current figures underscore the growing importance of stablecoins:

• Over USD 27.6 trillion was transferred globally using stablecoins in 2024 – three times the total volume of all Visa credit card transactions during the same period.
• The market capitalisation of leading stablecoins such as Tether (USDT) and USD Coin (USDC) has surpassed USD 250 billion.
• Tether alone holds more than USD 100 billion in US government bonds – more than many central banks around the world.

Defining stablecoins: the current understanding

Stablecoins are digital payment instruments whose value is pegged to a fiat currency, such as the US dollar or the euro, in order to minimise price volatility. By mirroring the value of these underlying assets, stablecoins offer a high degree of price stability, unlike more volatile cryptocurrencies such as Bitcoin or Ethereum. The peg is typically maintained at a 1:1 ratio, meaning that one stablecoin unit is intended to consistently represent the value of one unit of the reference currency.

The issuance and trading of stablecoins are based on blockchain technology, which enables global, transparent and low-cost transactions 24/7. In addition to serving as a payment method, stablecoins can also function as a store of value.

What sets stablecoins apart from traditional cryptocurrencies is their low volatility and external value peg. While Bitcoin and similar assets are independent, unbacked digital currencies that experience significant price swings, stablecoins act as a “safe haven” and form a critical bridge between decentralised finance and traditional financial systems.

A brief history of stablecoins

The first stablecoins emerged in 2014 as a response to the extreme price fluctuations in the cryptocurrency market. Tether (USDT), pegged to the US dollar, was among the earliest and quickly became a standard for crypto trading. Since then, a variety of other stablecoins have entered the market, including USD Coin (USDC), DAI and TrueUSD (TUSD). As the DeFi ecosystem expanded, so did the demand for stable digital assets. Regulatory developments – such as the EU’s MiCA (Markets in Crypto-Assets) regulation and the GENIUS Act in the United States – are now laying the groundwork for greater transparency and enhanced investor protection.

Stablecoins play an increasingly vital role in the modern capital market. They enable fast, cost-efficient transfers between exchanges and financial institutions, even outside traditional banking hours. As a key link between the crypto and fiat worlds, they facilitate access to digital assets and help integrate traditional financial products into blockchain-based infrastructure.

Moreover, stablecoins are unlocking new business models, particularly in areas such as DeFi, tokenised securities and digital bonds, marking their growing relevance in both emerging and established financial ecosystems.

Opportunities and risks for investors

Opportunities: Stablecoins offer greater price stability than traditional cryptocurrencies, making them attractive both as a store of value and as a medium of exchange. Their low volatility also makes them ideal entry points into decentralised finance (DeFi), where they enable new investment opportunities such as crypto lending, staking (locking and releasing assets) and the purchase of tokenised bonds.

Risks: The key risk associated with stablecoins is the reliability of their underlying reserves. If a stablecoin is not fully backed, it may lose value – and investor trust. Centralised stablecoins also carry counterparty risks, including potential insolvency or mismanagement by the issuer. Furthermore, legal and regulatory developments can impact the issuance and use of stablecoins, making it essential for investors to monitor these frameworks closely to avoid negative surprises.

Examples of stablecoin-based financial products

Stablecoins are increasingly serving as the foundation for innovative, blockchain-based financial products, particularly digital bonds. A few notable examples include:

• Société Générale (2023): The French bank issued a digital bond on the Ethereum blockchain, with both interest and principal paid in a euro-denominated stablecoin.
• Franklin Templeton: The global asset manager offers a blockchain-based fund for US government bonds, with stablecoins used for deposits and withdrawals.

These products combine the familiarity of traditional financial instruments with the efficiency, transparency and flexibility of blockchain technology.

Outlook: Stablecoins – temporary trend or financial breakthrough?

The year 2025 could be remembered as the moment stablecoins became widely accepted as “digital money”. Surging transaction volumes, rising market capitalisation and expanding use cases all support this view. Crucially, regulatory frameworks like the EU’s MiCA regulation and the US GENIUS Act are now providing the legal certainty required for long-term adoption.

The growing number of proven, stablecoin-based financial products also reflects their staying power. With hundreds of tokenised bonds and digital funds already available, stablecoins are no longer a fringe innovation—they’re rapidly becoming a foundational element of tomorrow’s financial markets.