What are stablecoins? How USDC and USDT work in 2026

The crypto you can actually spend

Bitcoin can move rapidly in a day. Ethereum isn't far behind. For most people, that volatility creates a practical problem: how do you use crypto for everyday transactions when the value keeps shifting?

Stablecoins solve this. They're cryptocurrencies designed to hold a fixed value — typically $1 — by backing each token with real reserves. You get the speed and accessibility of crypto without the price swings.

And in 2026, they've moved well beyond crypto trading. Visa, for example, launched USDC settlement in the United States in December 2025, with US banks now settling transactions over the Solana blockchain — seven days a week, including weekends and holidays. That goes beyond a crypto experiment and potentially enters the realm of a new financial infrastructure.

What is a stablecoin?

A stablecoin is a cryptocurrency pegged to the value of a real-world asset — almost always the US dollar.

The most common type is fiat-backed: the issuing company holds $1 in reserve for every stablecoin in circulation. When you hold one USDC or one USDT, the issuer holds a matching dollar (or equivalent asset) in a bank or treasury account. Want your dollar back? You redeem the token. That backing is what keeps the price stable.

Think of it as a digital dollar that moves on blockchain rails. It behaves like cash but settles in seconds, crosses borders without a correspondent bank, and never closes for the weekend.

USDC vs. USDT: the two that matter

Dozens of stablecoins exist, but two dominate: USDT (Tether) and USDC (USD Coin).

USDT launched in 2014 and remains the largest, with a market cap above $111 billion — the third-largest crypto asset after Bitcoin and Ethereum. Its first-mover advantage gave it deep liquidity across nearly every exchange globally. It's the default for traders who need to move quickly between positions.

USDC launched in 2018 through Circle and Coinbase with a different focus: transparency and regulatory compliance. Circle holds reserves primarily in cash and short-term US Treasuries and publishes monthly attestation reports verified by independent auditors. That clarity has made USDC the preferred choice for institutions, fintechs, and anyone building on regulated rails.

The short version: USDT wins on liquidity and reach. USDC wins on transparency and institutional trust. Both are pegged to $1 and widely supported.

Why stablecoins are growing fast

Banks and payment networks are adopting them

Visa's monthly USDC settlement volume reached an annualized run rate of $3.5 billion by late 2025. US banks can now settle Visa transactions in USDC on Solana — marking the first time that mainstream financial institutions are using a stablecoin for actual settlement, not just custody.

The practical benefit: a settlement that works every day of the week, not just the five-day banking window.

Cross-border payments are getting cheaper

Traditional remittance services typically charge 5–7% to move money internationally. Stablecoins can move the same value across borders in seconds for a fraction of that cost. For anyone sending money home, paying international suppliers, or operating in a country with currency instability, that difference is significant.

They power the on-chain economy

Stablecoins are the base currency for most DeFi activity — used as collateral, as liquidity in trading pools, and as the settlement layer for on-chain transactions. The broader stablecoin market has surpassed $200 billion in market cap, with annual transaction volumes that rival major payment networks.

What you can actually do with stablecoins

Hold value during volatility: When crypto markets drop, stablecoins let you step aside without exiting to fiat. Your funds stay in the ecosystem, ready to redeploy when conditions shift — without triggering a bank transfer.

Earn interest: With Nexo’s Flexible Savings, you can earn up to 9% annual interest* on USDC, paid out daily. Your holdings remain accessible, meaning you can swap, trade, or even withdraw. The rates depend on your Loyalty Tier and are subject to change. 

Borrow against your holdings: Stablecoins don't fluctuate, which makes them predictable collateral. On Nexo, stablecoins carry a 90% loan-to-value ratio — meaning you can borrow against almost the full value of what you hold, unlocking liquidity without selling. Rates start from as low as 1.9%, depending on your loan-to-value ratio and Loyalty Tier. 

Spend them directly: The Nexo Card** lets you spend stablecoins. In Debit Mode, you spend your stablecoins directly. In Credit Mode, they act as collateral while you borrow and spend.

Trade and swap instantly. On Nexo, you can swap between USDC, Bitcoin, Ethereum, and 100+ other assets 24/7, with no need to move funds between platforms.

Risks to understand

Stablecoins solve volatility, but they come with their own risks.

Reserve transparency: A stablecoin is only as reliable as what backs it. USDC's monthly audits and straightforward reserve composition give it strong credibility. USDT's quarterly reports and more varied reserve structure have historically attracted more scrutiny. Before holding either at scale, it's worth understanding what's actually behind the peg.

Depeg risk: Major stablecoins like USDC and USDT have historically held close to $1, even during periods of market stress. But the peg can drift temporarily, and smaller or algorithmic stablecoins have failed entirely. Stick to well-established options with transparent reserves.

Regulatory evolution: Stablecoin regulation is still developing globally. The US GENIUS Act, signed in July 2025, established a clearer framework for stablecoin issuers — a positive step, but not the final word. Rules will continue to evolve.

Stablecoins are becoming the rails of digital finance

What started as a tool for crypto traders is now being used by banks, payment networks, and anyone who needs to move dollars quickly and cheaply across the world.

For individuals, the opportunity is straightforward: hold digital dollars that don't lose value to volatility, earn yield while you hold them, and use them to pay, borrow, or trade — all without leaving the crypto ecosystem.

Frequently asked questions

1. What is a stablecoin? A stablecoin is a cryptocurrency designed to hold a fixed value — typically $1 — by backing each token with real reserves like cash or US Treasuries. It combines the stability of traditional currency with the speed and accessibility of crypto.
2. How does a stablecoin keep its $1 value? Fiat-backed stablecoins hold $1 in reserve for every token in circulation. If you want your dollar back, you redeem the token. That direct backing is what keeps the price stable.
3. What's the difference between USDC and USDT? USDC prioritizes transparency and regulatory compliance, with monthly audited reports and reserves held in cash and US Treasuries. USDT is larger and more widely traded, with quarterly reports and a more varied reserve structure. Both are pegged to $1.
4. Can you earn interest on stablecoins? Yes. Platforms like Nexo offer up to 9% annual interest on USDC, paid daily, with flexible access to your funds.
5. Are stablecoins risk-free? No. While major stablecoins are generally reliable, risks include reserve transparency, platform reliability, temporary depegging during market stress, and evolving regulation. Understanding what backs your stablecoin and where you hold it matters.
6. Why are banks using stablecoins? Stablecoins allow settlement seven days a week, including weekends and holidays. Visa's USDC settlement program is one example of banks adopting stablecoins for real operational benefits.
7. What are stablecoins used for? Cross-border payments, preserving value during crypto volatility, earning interest, borrowing, trading between crypto assets, and everyday spending via crypto cards.
8. Can a stablecoin lose its $1 peg? Major stablecoins like USDC and USDT have historically stayed close to $1, recovering quickly from minor fluctuations. Smaller or algorithmic stablecoins carry significantly higher depeg risk.

These materials are accessible globally, and the availability of this information does not constitute access to the services described, which services may not be available in certain jurisdictions. These materials are for general information purposes only and not intended as financial, legal, tax, or investment advice, offer, solicitation, recommendation, or endorsement to use any of the Nexo Services and are not personalized, or in any way tailored to reflect particular investment objectives, financial situation, or needs. Digital assets are subject to a high degree of risk, including but not limited to volatile market price dynamics, regulatory changes, and technological advancements. The past performance of digital assets is not a reliable indicator of future results. Digital assets are not money or legal tender, are not backed by the government or by a central bank, and most do not have any underlying assets, revenue stream, or other source of value. Independent judgment based on personal circumstances should be exercised, and consultation with a qualified professional is recommended before making any decision.

*Rates vary across jurisdictions. Check nexo.com/earn-crypto for current rates and available assets in your region. 

**The Nexo Card is currently only available to European Economic Area (EEA) citizens and residents.