Stablecoins address a longstanding problem with cryptocurrency: volatility. While flagship digital assets like bitcoin have offered extraordinary returns - gaining more than 150 in some years - they are also known for price swings, excellent for traders and less popular with short-term investors.
As a solution, the digital asset industry has created stablecoins which maintain a consistent value, offering reliability and increasing day-to-day relevance in both developed and emerging markets, and allowing for cross-border money transfers and payments to be made far more cheaply and quickly.
Stablecoins are digital tokens that are backed 1:1 by reserve assets such as US dollars, short-term treasury bills or insured bank deposits similar to how currencies used to be pegged to gold assets in a country's reserve.
Stablecoins' stability and fiat currency backing are attracting some of the world's largest fintech and payment technology firms.
PayPal, best known for its digital payments platform, has introduced a stablecoin. Credit card giant Visa is investing in multiple firms that enable stablecoin payments and most recently invested in BVNK, a start-up that allows businesses to use stablecoins to make payments.