And yet, despite their well-known infirmities, more stablecoins keep coming. Regulators, too, seem to be more receptive to having them around, despite spectacular blowups like when TerraUSD breached its US$1 ($1.33) price target in May 2022 and wiped out about US$500 billion from cryptocurrency markets. Circle’s USD Coin briefly lost its peg during the US regional banking crisis of 2023.
In the decade that they have been around as an asset class, crypto stablecoins, which advertise tranquility in an ocean of tumult, have hardly lived up to their billing. Not one out of the 68 tokens studied by researchers at the Bank for International Settlements has managed to stay on its peg at all times.
Tether and USD Coin, the two largest players, reference their values 1:1 to the dollar, which enables them to act as a bridge of sorts between virtual and real-world representations of money. However, they have very little use outside the domain of crypto trading. For the broader population that doesn’t dabble in Bitcoin or Ether, keeping money in a bank that has deposit insurance has always been a safer option.
