Stablecoin Glossary
Comprehensive resource for understanding terms and concepts in the stablecoin ecosystem
A
Algorithmic Stablecoin
A type of stablecoin that is not backed by any direct collateral. Instead, it uses complex algorithms and smart contracts to automatically manage the token supply to maintain its price peg. These are considered highly risky due to their vulnerability to de-pegging events.
AML (Anti-Money Laundering)
Legal and regulatory measures designed to prevent the generation of income through illegal actions. In the stablecoin context, issuers must implement AML procedures to track and report suspicious transactions.
Average Off-Peg
A metric measuring how far a stablecoin deviates from its intended peg value on average. Lower off-peg percentages indicate better stability and reliability of the stablecoin.
B
Bank Adoption
The percentage of traditional banking institutions that custody, clear, or integrate stablecoins into their services. A key metric for measuring mainstream financial system integration.
Basis Points
A unit of measure equal to 1/100th of 1%. In stablecoin trading, basis points measure the efficiency of swaps and the tightness of spreads in liquidity pools.
Battle-Tested
Refers to stablecoin designs that have survived market stress, bank runs, or extreme volatility while maintaining their peg. Examples include major events like the Terra/Luna collapse.
BIS (Bank for International Settlements)
An international financial institution that serves central banks. The BIS plays a key role in developing standards for stablecoin regulation and CBDC interoperability.
BUIDL
A tokenized money market fund by BlackRock that provides yield-bearing exposure to U.S. Treasury bills on the blockchain, representing institutional adoption of stablecoin technology.
C
CBDC (Central Bank Digital Currency)
Digital forms of fiat money issued directly by central banks. CBDCs are exploring interoperability with stablecoins to enable seamless cross-border transactions.
Circulating Supply
The total amount of a stablecoin that is currently in circulation and available for trading. This is a key metric for measuring adoption and market capitalization.
Collateral Ratio
The ratio of backing assets to the total supply of a stablecoin. Over-collateralized stablecoins have ratios above 100% to absorb volatility.
Commodity-Backed Stablecoin
A stablecoin pegged to the value of physical commodities, like gold or oil. Each token represents ownership of a specific quantity of the commodity, which is stored in a secure, audited vault.
Counterparty Risk
The risk that the centralized issuer of a collateralized stablecoin will mismanage, lose, or fail to honestly report its reserves, leading to a loss of value for the stablecoin.
Cross-Border Remittances
The use of stablecoins to send money across international borders. This offers a faster, cheaper, and more efficient alternative to traditional remittance services.
Crypto-Backed Stablecoin
A stablecoin collateralized by a pool of other cryptocurrencies. These are typically over-collateralized to absorb the price volatility of the underlying crypto assets.
D
De-Pegging Risk
The risk that a stablecoin loses its 1:1 price peg with its underlying asset due to market panic, insufficient collateral, or flaws in its stabilizing mechanism.
Decentralized Finance (DeFi)
An ecosystem of financial applications built on blockchain technology. Stablecoins are a fundamental component, used for lending, borrowing, and providing liquidity.
DefiLlama
A major DeFi analytics platform that tracks metrics like Total Value Locked (TVL) and stablecoin market capitalization across different blockchains and protocols.
Delta-Neutral
A trading strategy where positions are balanced to be unaffected by small price movements. Some synthetic stablecoins like USDe use delta-neutral strategies to maintain their peg.
DEX (Decentralized Exchange)
A cryptocurrency exchange that operates without a central authority, using smart contracts for trading. DEXs use stablecoins heavily for trading pairs and liquidity pools.
E
E-Commerce Integration
The process of major online retail platforms accepting stablecoins as a payment method. Shopify and Stripe already support USDC payments natively.
Euro Stablecoin
Stablecoins pegged to the Euro currency, such as EURS or EUROC. Part of the universal fiat coverage milestone for global stablecoin adoption.
F
FDIC (Federal Deposit Insurance Corporation)
U.S. government agency that insures bank deposits. The integration of stablecoins with FDIC-insured banks represents a major step in regulatory compliance.
Fiat-Collateralized Stablecoin
The most common type of stablecoin, backed 1:1 by reserves of a specific fiat currency, such as the U.S. dollar, held in a financial institution.
Fiat Coverage
The range of traditional currencies that have corresponding stablecoin representations. Current coverage includes USD, EUR, JPY, with GBP and CAD in development.
Financial Inclusion
The goal of providing affordable financial services to underserved populations globally. Stablecoins enable banking services through mobile phones without traditional bank accounts.
Fully-Reserved
Stablecoins that maintain 100% backing with liquid assets, typically cash and short-term government securities. Examples include USDC and USDT.
G
G10 Countries
Group of ten major industrialized nations whose currencies are targeted for stablecoin coverage. Includes USA, UK, Japan, Canada, and major European nations.
G20
International forum of 20 major economies developing coordinated stablecoin regulations. G20 consensus is crucial for global regulatory harmonization.
Global Rulebook
The emerging international regulatory framework for stablecoins, including standards for reserves, auditing, and cross-border operations.
I
Illicit Activity
The use of stablecoins for illegal purposes such as money laundering, sanctions evasion, or fraud. The transparency of blockchains helps in tracking and mitigating this risk.
Interoperability
The ability of different blockchain networks and payment systems to work together seamlessly. Critical for stablecoin adoption across various platforms and CBDCs.
K
KPI (Key Performance Indicator)
Measurable values that demonstrate progress toward adoption goals. For stablecoins, KPIs include transaction speed, fees, and geographic coverage.
KYC (Know Your Customer)
Identity verification processes required by financial regulations. Most centralized stablecoin issuers implement KYC for large transactions or redemptions.
L
L2 (Layer 2)
Scaling solutions built on top of main blockchains to increase transaction speed and reduce costs. Many stablecoin transactions now occur on L2 networks.
Liquidity Pool
Smart contract-based reserves of tokens that enable decentralized trading. Stablecoin pairs often provide the deepest liquidity in DeFi.
M
Market Capitalization
The total value of all tokens in circulation for a stablecoin. Calculated by multiplying the circulating supply by the current price.
mBridge
A multi-CBDC platform developed by the BIS for cross-border payments. Successfully tested RMB-USDC trades, demonstrating stablecoin-CBDC interoperability.
MiCA (Markets in Crypto-Assets)
European Union regulation providing comprehensive rules for crypto-assets including stablecoins. Sets standards for reserves, governance, and consumer protection.
Mini-Apps
Lightweight applications within messaging platforms like WhatsApp and Telegram that enable stablecoin transactions without leaving the chat interface.
Mobile-First Wallets
Cryptocurrency wallets designed primarily for smartphones, enabling stablecoin access in developing countries. Examples include Valora and Strike.
N
Native Checkout
Direct integration of stablecoin payments into e-commerce platforms without requiring third-party payment processors.
Native Yield
Interest or returns generated directly by holding certain stablecoins, typically from underlying Treasury bills or money market funds.
O
Off-Peg Event
When a stablecoin trades significantly above or below its intended peg value. Major off-peg events can indicate systemic issues with the stablecoin.
On-Chain Proof-of-Reserves
Cryptographic verification that allows users to independently verify that a stablecoin issuer holds sufficient reserves to back all tokens in circulation.
Over-Collateralized
When a stablecoin is backed by assets worth more than the face value of the stablecoins issued, providing a safety buffer against volatility.
P
Passport-able Licensing
Regulatory framework where a stablecoin license in one jurisdiction is recognized in others, enabling global operations without multiple licenses.
Peg Engineering
The technical mechanisms and economic incentives designed to maintain a stablecoin price at its target value.
Platform Integration
The number of major commerce and financial platforms that have native stablecoin support. A key metric for mainstream adoption.
PYUSD
PayPal USD, a stablecoin issued by PayPal, representing traditional fintech companies entering the stablecoin market.
R
Regulation
The legal and compliance frameworks being developed by governments worldwide to oversee stablecoins, focusing on consumer protection, financial stability, and anti-money laundering (AML) standards.
Regulatory Jurisdictions
Countries or regions that have established clear legal frameworks for stablecoin operations. Progress is measured by the number of G20 nations with active regulations.
Remittance Corridor
A specific route for sending money between two countries. Stablecoins are reducing costs on major corridors from 6%+ to under 2.2%.
Reserve Assets
The backing collateral held by stablecoin issuers, typically consisting of cash, Treasury bills, and other highly liquid assets.
RMB (Renminbi)
The official currency of China. RMB-backed stablecoins are being tested for international trade and CBDC bridge transactions.
S
Self-Healing Metrics
Automated systems that collect, verify, and update stablecoin adoption data in real-time without manual intervention.
Slippage
The difference between expected and actual prices when trading. Low slippage (sub-2 basis points) in stablecoin pools indicates mature market infrastructure.
Smart Contract
Self-executing code on blockchains that powers DeFi applications and some stablecoin mechanisms. Critical for algorithmic and crypto-backed stablecoins.
Stablecoin
A type of cryptocurrency designed to maintain a stable value by pegging its price to an underlying asset, such as a fiat currency or commodity.
Stablecoin Clarity Act
Proposed U.S. legislation to provide clear regulatory framework for stablecoin issuance and operations, currently in committee.
Stableswap
Specialized automated market maker (AMM) algorithm optimized for trading between stablecoins with minimal slippage.
Store of Value
An asset that can maintain its purchasing power over time. Stablecoins are often used as a store of value in regions with high inflation or monetary instability.
Synthetic Stablecoin
Stablecoins that maintain their peg through derivatives and financial engineering rather than direct asset backing. Examples include USDe.
T
Third-Party Trust Banks
Specialized financial institutions that provide custody and clearing services for stablecoins on behalf of traditional banks.
Total Value Locked (TVL)
The total amount of assets deposited in DeFi protocols. Over 70% of DeFi TVL is denominated in stablecoins, showing their central role.
Transaction Finality
The point at which a blockchain transaction becomes irreversible. Fast finality is crucial for stablecoin payments in commerce.
Treasury Bills
Short-term U.S. government securities that back many fiat-collateralized stablecoins and provide yield for tokenized funds.
U
U.S. Treasury-Backed Stablecoin
A stablecoin supported specifically by short-term U.S. government treasuries. These can be structured to offer a native yield directly to token holders.
USDC
USD Coin, a major fiat-backed stablecoin issued by Circle, known for its regulatory compliance and transparency.
USDe
Ethena's synthetic dollar that maintains its peg through delta-neutral positions and derivatives rather than traditional collateral.
USDT
Tether, the largest stablecoin by market cap, widely used for trading and cross-border transactions despite past transparency concerns.
USDY
Ondo's yield-bearing stablecoin backed by short-term U.S. Treasuries and bank deposits, providing native yield to holders.
Un-/Under-banked
Populations with limited or no access to traditional banking services. A primary target demographic for stablecoin financial inclusion initiatives.
Universal Fiat Coverage
The goal of having stablecoin representations for all major global currencies, enabling seamless international transactions.
V
Velocity
The rate at which stablecoins change hands in transactions. Higher velocity indicates more active usage versus passive holding.
W
Wallet Embeds
Integration of stablecoin functionality directly into popular applications and services without requiring separate crypto wallets.
X
Cross-Border Share
The percentage of international remittances and trade settlements conducted using stablecoins versus traditional payment rails.
Y
Yield-Bearing Stablecoin
Stablecoins that generate returns for holders through underlying investments in Treasury bills or other low-risk assets. Examples include BUIDL and USDY.
Yen Stablecoin
Stablecoins pegged to the Japanese Yen, part of the push for comprehensive G10 currency coverage in the stablecoin ecosystem.
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