What Is a Stablecoin? Reserves, Types and the Largest Coins

How a stablecoin holds its value

A dollar stablecoin is a liability of the company that issues it. When a customer sends the issuer $1 million, the issuer creates 1 million tokens and adds the cash to its reserves. When tokens come back for redemption, the issuer destroys them and pays out dollars. The token supply rises and falls with demand, while the reserves are meant to move with it one for one.

The market price stays close to $1 because of that redemption promise. If a token trades at 99 cents on an exchange, a firm with redemption rights can buy it there and redeem it with the issuer for a full dollar. That trade pulls the price back up. It works only while the market believes the reserves are there and that redemptions will be paid on time.

The business model sits in the reserves. The issuer invests customer dollars in cash, bank deposits and short-term Treasury bills and keeps the interest. Holders receive none of it from the issuer: the GENIUS Act bars a payment stablecoin issuer from paying holders "any form of interest or yield" for simply holding the token.

The three main types of stablecoin

DefiLlama, a public data service that tracks stablecoin supply, sorts stablecoins by how the peg is maintained. Of the dollar value of the coins it listed on 27 October 2026, about 91% was in fiat-backed coins, about 9% in coins backed by other digital assets and 0.2% in algorithmic coins.

• Fiat-backed. Reserves of cash, bank deposits and short-term government debt held by the issuer. USDT, USDC and PayPal USD are in this group. The GENIUS Act's reserve rules are written for this model.
• Backed by other digital assets. The token is created against deposits of other digital assets, typically worth more than the tokens issued so that a fall in their price does not leave the coin short. Sky Dollar (USDS), Dai (DAI) and Ethena USDe fall in this group in DefiLlama's classification.
• Algorithmic. Software expands and contracts supply to defend the peg, with little or no reserve behind it. The best-known example, TerraUSD, lost its peg and collapsed in May 2022, which a presentation to the Treasury Borrowing Advisory Committee describes as triggering a broader loss of confidence in stablecoins.

The differences show up in a sell-off. A fiat-backed coin is only as sound as its reserves and its bank relationships. A coin backed by other digital assets depends on the value of that collateral holding up. An algorithmic coin depends on confidence alone.

How big the market is, and who leads it

Stablecoins in circulation totalled $303.3 billion on 27 October 2026, according to DefiLlama. That is 4.3% below the record of $317.1 billion set on 17 May 2026 and 1.1% below the $306.8 billion of a year earlier. The year before that was the growth spurt: supply rose 78% between 27 October 2024 ($172.3 billion) and 27 October 2025.

Two coins hold 83.5% of the market. Below them the field is thin: no other stablecoin had more than $7 billion in circulation. Almost all of it is dollars. Coins pegged to the dollar made up 99.4% of the total, so coins pegged to every other currency and asset share the remaining 0.6%.

Our CBDC and stablecoin tracker follows total supply and the largest coins as DefiLlama updates them.

What sits in the reserves, and where the risk is

The peg is a promise backed by assets, and the assets have failed before. In March 2023, Circle had about $3.3 billion of USDC reserves at Silicon Valley Bank when the bank failed, and USDC briefly traded below $1, according to the Treasury Borrowing Advisory Committee presentation of April 2025. The de-peg was brief, but it showed that reserve cash held at a bank carries that bank's risk.

The GENIUS Act now spells out what a US payment stablecoin issuer may hold. Reserves must back outstanding tokens at least 1 to 1 and may consist only of:

• US coins and currency, or balances at a Federal Reserve Bank;
• demand deposits at insured banks and credit unions;
• Treasury bills, notes or bonds with 93 days or less to maturity;
• overnight repurchase and reverse repurchase agreements tied to Treasuries;
• shares of government money market funds that hold only those assets, plus other similarly liquid federal government assets a regulator approves.

Issuers may not pledge or reuse those reserves, with narrow exceptions. They must publish the size and composition of their reserves every month, have that report examined by a registered public accounting firm, and have the chief executive and chief financial officer certify it. A knowingly false certification carries criminal penalties. If an issuer fails, holders' claims on the required reserves rank ahead of every other creditor.

A stablecoin is not a bank deposit. The Act says payment stablecoins are not backed by the full faith and credit of the United States and are not covered by FDIC or credit union share insurance, and it bars issuers from marketing them as if they were.

How US law now regulates payment stablecoins

The GENIUS Act became Public Law 119-27 on 18 July 2025, after passing the Senate 68 to 30 and the House 308 to 122. It takes effect on 18 January 2027, 18 months after enactment. Its central rule is short: only a permitted payment stablecoin issuer may issue a payment stablecoin in the United States.

• Who can issue. Approved subsidiaries of insured banks and credit unions, nonbank companies and uninsured national banks approved by the Office of the Comptroller of the Currency, and state-chartered issuers. An issuer with $10 billion or less outstanding may choose a state regime if it is substantially similar to the federal one.
• Exchanges and apps. From 18 July 2028, three years after enactment, a digital asset service provider may not offer or sell a payment stablecoin to people in the US unless a permitted issuer issued it, subject to Treasury safe harbors and rules for foreign issuers from comparable regimes.
• Money laundering and sanctions. Issuers are treated as financial institutions under the Bank Secrecy Act. They must be able to freeze, seize or burn tokens when served with a lawful order.
• Securities law. A payment stablecoin from a permitted issuer is excluded from the definition of a security.

Regulators are still writing the detail. Of the 15 GENIUS Act rulemakings our tracker follows in the Federal Register, one is final (the OCC rule published 23 October 2026, effective 18 January 2027), one is an interim final rule from Treasury, and 13 are still proposals. Our GENIUS Act guide covers each requirement and deadline.

Stablecoins, a digital dollar and the Treasury market

A stablecoin is a private company's promise to pay dollars. A central bank digital currency would be a direct liability of the Federal Reserve. US policy has moved toward the first and against the second. Executive Order 14178 of 23 January 2025 directs agencies to "promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide" and prohibits them from establishing or promoting a CBDC. Title XI of Public Law 119-101, which became law on 11 July 2026, bars the Fed from issuing a CBDC until 31 December 2030.

The reserve rules tie stablecoin growth to short-term government debt. Even if the entire $303.3 billion supply sat in Treasury bills, it would equal 4.3% of the $7.12 trillion of marketable bills outstanding on 30 September 2026, according to the Treasury's Monthly Statement of the Public Debt. The share is small. The link is structural: compliant reserves can only be cash, deposits and the shortest Treasury paper, so any growth in regulated coins adds demand at the short end of the curve.

Congress has not finished. The CLARITY Act, which would set rules for digital asset markets and, in its Senate version, stop exchanges from paying interest-like rewards on stablecoin balances, failed a Senate procedural vote on 15 September 2026.