Stablecoins: Disruptive stability
There is hardly any other industry that nurtures its buzzwords as fervently as the world of finance does. First there was “blockchain,” then “NFTs,” and today “stablecoins” are being talked about, even by US Treasury Secretary Scott Bessent. What sounds like just another buzzword by now denotes a trend that, with a market volume north of USD 200 billion and a transaction volume surpassing USD 27 trillion annually – more than that of Visa and Mastercard combined –, has long ceased being merely a side note. While superstar Bitcoin makes headlines with new all-time highs, stablecoins look inconspicuous at first glance. But precisely therein lies their explosive disruptive power: stablecoins are not the dazzling fireworks of the cryptoverse, but are rather the foundation onto which the monetary system of the future may shift.
What’s the concept behind stablecoins…
Stablecoins are digital tokens that replicate the value of traditional currencies, most commonly the US dollar. Unlike volatile cryptocurrencies like Bitcoin or Ether, stablecoins are designed not to fluctuate significantly in value, but to hold steady. This is achieved in a number of different ways. The most common variant is the fiat-collateralized stablecoin, where each issued token is backed by cash or short-term government bonds. Tether (USDT) and the USD Coin (USDC) from Circle are examples of fiat-collateralized stablecoins. There are also crypto-collateralized stablecoins like DAI that aim to maintain stability through overcollateralization with other cryptocurrencies. Another category is commodity-backed stablecoins, which – like PAXG, for example – are pegged to assets like gold and thus additionally act as a store of value. And finally, there are algorithmic models that employ supply-and-demand adjustment mechanisms to keep a stablecoin pegged to a target without any backing by actual asset reserves. These models are widely regarded as being very risky and failures, by and large, at the latest ever since the spectacular crash of TerraUSD in the year 2022.
To the moon? | Not all cryptocurrencies live on volatility
Price performance of stablecoins, Bitcoin, and Ethereum, indexed
Sources: Bloomberg, Kaiser Partner Privatbank
The promise, though, is always the same: stability coupled with the benefits of blockchain technology – payments around the clock, worldwide, within seconds, and at minimal expense. In addition, stablecoins are programmable – contracts directly written into code can trigger payments, automatically transfer collateral, or freeze money until specified conditions have been met. The idea is to create a financial instrument that combines stability and innovation in equal measure.
Nomen est omen? | The name says it all (in most cases)
Price performance of Tether and USD Coin versus US dollar
Sources: Bloomberg, Kaiser Partner Privatbank
…and how stable are they really?
The stability of the two dominant stablecoins – USDC and Tether – stems from their peg to the US dollar. USDC makes a convincing impression by virtue of its transparent reserve management practices and its independent audits at regular intervals, which have earned it an industry-wide reputation as the “safest stablecoin.” Compliance with international rules (MiCA in Europe, GENIUS Act in the USA) creates regulatory clarity and trust, particularly for institutional users. However, a critical look at the stability of USDC and Tether reveals that the promised 1:1 parity with the US dollar is by no means guaranteed. This became particularly evident in March 2023, when the insolvency of Silicon Valley Bank (SVB) caused the price of USDC to drop to USD 0.87 for a time and it took days for the stablecoin to return to its original value. Tether likewise underwent phases in the past during which its price plunged to as low as USD 0.96, for instance during periods of regulatory uncertainty or market turbulence surrounding crypto exchanges. Although the peg was quickly restored in most cases, events of that kind nonetheless clearly show that the purported stability hinges on trust in stablecoin issuers, on the transparency of the backing reserves, and on the robustness of the traditional banking system. Stress situations in particular expose the vulnerability of stablecoins. So, despite the promise of stable prices, trust in stablecoins isn’t self-sustaining yet, but must constantly be earned anew through transparency and sound governance.
Duopoly | Tether and USDC dominate the market
Transaction volume per stablecoin
Sources: Visa Onchain Analytics Dashboard, Allium, Kaiser Partner Privatbank
Disruptiveness lies in the eye of the beholder
The GENIUS Act passed in the summer of 2025 in the USA marks the start of a new era for stablecoins. It creates a comprehensive set of federal regulations for the first time, mandating 100% reserve backing, monthly audits, and strict anti-money laundering controls. To some, this is a liberating coup that solidifies trust in digital dollars. To others, it’s the start of a dangerous liberalization of private currencies. One thing is clear, though: the enshrinement in law in the world’s largest national economy has definitively moved stablecoins to the center of today’s global finance discourse.
However, the new act is causing banks to break out in a sweat. They are allowed to issue digital tokens, but are prohibited from paying interest on them. Crypto platforms, in contrast, can continue to offer interest rewards to their savers. This is reminiscent of a trend from the 1980s, when money market funds dangled higher returns to lure savers away from banks and thereby changed the financial system forever. If stablecoins reprise this displacement now in digital form, the repercussions could be just as immense.
The crypto bro…
“Listen, that’s precisely the point. We’re experiencing a déjà-vu moment right now in the history of finance. Stablecoins today will change the rules of the game just like money market funds did back then, but they will do it faster, more globally, and technologically much more powerfully. Stablecoins are not merely a digital medium of exchange, they’re the next evolutionary step for money. In countries like Argentina, Nigeria, and Turkey, it has long been observable that people there are no longer seeking refuge in dollar bills, but are instead fleeing directly into digital dollars because their domestic currencies are crumbling in value and inflation is devouring everything. For those people, stablecoins are not a toy; they’re the only way to rescue their savings. Now, picture what that means for remittances. Every year, migrants send hundreds of billions in remittances back home, traditional financial service providers pocket 7% in fees to execute the transfers, and it takes days for the money to arrive. With stablecoins? It takes seconds and costs next to nothing. That’s not a promise; it’s already happening today. Anyone who doesn’t perceive that as a genuine breakthrough hasn’t comprehended what stablecoins are all about. But this is just the first wave. Programmable tokens open up worlds that we can hardly imagine. Artificial intelligences that make financial decisions autonomously. Businesses that allow their total liquidity to be managed automatically. Systems that regulate themselves without a bank butting in. And with a clear legislative framework in place today, the stage is now set: the big players can finally join in the action.
It’s obvious to me that we’re in the dawn of a new monetary era. People who don’t see that today will look back a few years from now and ask themselves why they didn’t take part in it.”
In the fast lane | One of the most rapidly growing digital asset segments
Stablecoin transaction volume, in USD billion
Sources: Visa Onchain Analytics Dashboard, Allium, Kaiser Partner Privatbank
…and the conventional investor
“We’ve seen it all before. Private forms of money not backed by a central bank are not a new phenomenon. In the 19th century in the USA, people spoke of a free-banking era. The outcome was instability, runs on banks, and ultimately a loss of trust in the unit of money. Whoever believes it will turn out differently this time misunderstands history. The problem back then is the same one today: a plethora of private issuers whose bills or tokens bear the same nominal value, but which are valued differently in real-world practice depending on the stability of the issuing entity. Stablecoins mirror that pattern exactly. A dollar is no longer a dollar, but is only worth as much as the value of the asset credibly backing a given token. Moreover, the facts today speak for themselves. The vast bulk of transactions do not take place in people’s everyday lives, but rather in cryptocurrency trading and arbitrage. The benefits in the real economy remain meager. Even 100% reserve backing doesn’t guarantee safety.
That’s why stablecoins aren’t progress to me, but rather regression. They’re a fragile construct that promises stability and, in the end, only creates new insecurity.”
Suitable for everyday use (?) | The vast bulk of transactions do not take place in the real economy
Stablecoin usage by purpose
Sources: Chainalysis, Fireblocks, Econofact, Kaiser Partner Privatbank
Golden mean
The truth lies, as it so often does, midway between the extremes. Today it is evident that stablecoins are neither a panacea nor just a gimmick. They supplement cash or bank deposits without completely replacing them. Their greatest value, though, lies in niches that harbor huge potential. In emerging-market countries, where traditional payment channels are costly and unreliable, stablecoins create genuine alternatives. For businesses, they open up new ways to route cross-border payments more efficiently and to manage liquidity across national boundaries. Stablecoins are already being used in the wealth management industry to settle tokenized asset transactions, a sector that is just getting underway.
At the same time, however, integrating stablecoins into the existing system remains a challenge. Banks fear for their deposit base if customers move money into stablecoins. Regulators are struggling to establish international standards while national governments are asking themselves whether stablecoins endanger their monetary policy sovereignty. And it’s still an open question whether private issuers like Circle or Tether will dominate in the long run or if commercial banks and central banks will introduce their own tokens that rearrange the playing field.
A look in the crystal ball
A look into the future also indicates that stablecoins could prove to be much more than a passing trend. They could give a billion people without bank accounts access to monetary stability for the first time. They make international payments faster, cheaper, and more transparent. They extend the reach of the US dollar, further solidifying its status as the world’s reserve currency. And they generate new demand for US Treasury bonds because every newly created stablecoin must be backed by high-quality collateral.
What role stablecoins will play in the long run will be decided on this terrain of tension between inclusion and instability and between innovation and risk. It is likely that stablecoins will become the lubricant of a new financial infrastructure, functioning quietly and inconspicuously, but wielding a potentially powerful impact.