Stablecoins solve one of crypto’s most common complaints — extreme price volatility — by anchoring their value to something stable, most often the US dollar. They generally fall into three types: fiat-collateralized (backed by real cash and cash-equivalent reserves held by the issuer), crypto-collateralized (backed by other cryptocurrencies, usually over-collateralized to absorb price swings), and algorithmic (using code-based supply adjustments instead of real reserves to try to hold the peg).

The nuance that matters most: a stablecoin’s stability is only as strong as its backing and the issuer’s transparency about it. Algorithmic stablecoins in particular have a documented history of catastrophically failing under stress — most famously TerraUSD’s collapse in 2022, which wiped out tens of billions of dollars in value within days. Even fiat-backed stablecoins are only as trustworthy as the audits proving the reserves genuinely exist and can cover redemptions.

🇵🇭 Philippine Example

Recent BSP guidance has directed licensed Virtual Asset Service Providers to more closely scrutinize stablecoins they list — reviewing how tokens are issued, redeemed, and backed, verifying reserve composition, and ensuring clear redemption facilities exist for holders. This reflects a broader regulatory trend of treating stablecoins as needing bank-like scrutiny of their reserves, not just as "a coin that happens to be worth a dollar."

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