Stablecoin is like bitcoin, but grounded in something close to reality

Slashing through the BS and putting common personal finance expressions in plain terms.

Sorting through the wild world of cryptocurrency is a task best left to those with a strong stomach and a hearty appetite for risk. If you find yourself yearning to hop on this carousel, but want to pick a crypto that feels slightly* safer, consider a stablecoin.

Essentially, a stablecoin is a cryptocurrency backed by an asset such as the US dollar or gold. Unlike bitcoin, a stablecoin’s value is meant to stay relatively fixed, and is dependent entirely on the value of the asset to which it’s attached. Proponents say this property of stablecoins will help risk-averse people and businesses feel comfortable accepting crypto, if digital currencies are indeed the future.

Stablecoins are already increasing in popularity. According to the Treasury Dept., the market value of stablecoins has gone up to ~$175 billion—a big jump from early 2020, when the value of these currencies was estimated at around $5 billion.

Unsurprisingly, any asset that claims to tie itself to the US dollar is going to attract regulatory attention, and indeed, the House Financial Services Committee held a hearing on stablecoins today. Nellie Liang, the Treasury Dept.’s undersecretary for domestic finance, warned lawmakers that a loss in confidence in stablecoins could trigger a run on the currency, which could make its value plummet.

*All cryptocurrencies come with risk and are not FDIC insured.