As blockchain technology reshapes global finance, stablecoins have emerged as a critical innovation, combining cryptocurrency’s efficiency with fiat currency’s stability. The following is a series of 3 articles tackling stablecoins 101:
Part 1: Understanding the stablecoins Part 2: Infrastructure and tools to build with stablecoins Part 3: Navigating regulation for stablecoins
Let's start!
The Definition and Types of Stablecoins
Stablecoins are blockchain-based digital assets designed to maintain a fixed value relative to external references, most commonly fiat currencies like the US dollar or euro. Unlike volatile cryptocurrencies such as Bitcoin, stablecoins achieve price stability through three primary collateralization models, each with distinct risk profiles and operational frameworks.
Fiat-Collateralized Stablecoins
These dominate the market, representing over 90% of the $200 billion stablecoin sector. They maintain 1:1 reserves of traditional currency held in regulated institutions. For example, every USDC token issued by Circle corresponds to $1 held in cash or short-term US Treasuries, with monthly attestations verifying reserve adequacy. Tether (USDT), the largest stablecoin with a $137 billion market cap, similarly backs its tokens with reserves comprising 85% cash equivalents and 15% Bitcoin. Regulatory frameworks like the EU’s MiCA now mandate minimum liquid reserves and redemption guarantees for these assets.
Crypto-Collateralized Stablecoins
Decentralized alternatives like Dai (DAI) use overcollateralization of cryptocurrencies to maintain stability. Users lock Ethereum or other digital assets worth 150–200% of the stablecoin’s value into smart contracts, protecting against crypto market volatility. While appealing for decentralization purists, these models remain vulnerable to cascading liquidations during market crashes, as seen during Ethereum’s 2023 price collapse.
Algorithmic Stablecoins
Non-collateralized variants like Ethena’s USDe employ supply-control algorithms, expanding or contracting token circulation based on demand. However, the TerraUSD collapse in 2022 demonstrated their fragility during market stress, prompting regulatory bans under the STABLE Act of 2025.
How Stablecoins Operate: From Issuance to Redemption
Minting and Reserve Management
The lifecycle begins when users deposit fiat currency into an issuer’s reserve account. Smart contracts then mint equivalent stablecoins on supported blockchains—Ethereum hosts 65% of stablecoins, while Solana and Arbitrum gain traction for lower fees. Issuers like Circle generate revenue through Treasury Bill yields on reserves, estimated at $2.3 billion annually for USDC.
Regulatory compliance now dictates stringent reserve practices. MiCA requires European issuers to hold 30% reserves in daily-liquid assets, while the GENIUS Act mandates 100% US Treasury backing for American stablecoins. Third-party auditors like Grant Thornton verify these reserves monthly, though concerns persist about Tether’s opaque disclosures.
Redemption Mechanisms
Users redeem stablecoins by sending tokens to issuer-controlled addresses, triggering “burning” (permanent removal from circulation) and fiat disbursement within 24 hours under MiCA guidelines. However, the 2025 STABLE Act allows issuers to impose redemption fees during crises, raising concerns about consumer protection.
Liquidity management remains critical. During March 2023’s banking crisis, USDC temporarily depegged after $3.3 billion of its reserves became trapped in Silicon Valley Bank, prompting emergency Federal Reserve interventions.
Real-World Applications in 2025
Cross-Border Remittance Innovators
1. Sling Money (Pan-African/Europe)
Sling’s USDP-powered app enables instant transfers between 50+ European and African countries at near-zero fees, processing $24M monthly. Its integration with local mobile wallets like M-Pesa allows recipients to receive funds in local currencies while leveraging stablecoins for backend liquidity.
2. Kamix (France-Africa Corridor)
This Paris-based fintech specializes in Euro-to-CFA franc remittances using EURC. By partnering with African neobanks, Kamix reduces fees from traditional 8% for 300,000+ migrant workers, settling 90% of transactions via Polygon for sub-$0.01 costs.
Consumer-Focused Stablecoin Wallets
3. Tuyo (Global)
Aragon co-founder Jorge Izquierdo’s self-custodial wallet abstracts blockchain complexity for 850,000+ users. Its account abstraction feature enables single-click USDC swaps across Ethereum, Arbitrum, and Base, while hiding gas fees through sponsored transactions.
4. HuruPay (Pan-African)
Ghana’s HuruPay provides virtual dollar accounts to freelancers and SMEs in 40+ countries, shielding users from 200%+ local inflation. The platform processes $18M monthly in USDC payrolls, with instant off-ramps to mobile money networks like MTN and Airtel.
Enterprise-Grade Solutions
5. Mesta (Global B2B)
Mesta’s hybrid fiat-stablecoin rails processed $12M in 12 weeks for corporates like Bolt and Mocoh SA. Its platform auto-converts 55% of transactions to USDC for cross-border legs, reducing FX losses by 74% compared to traditional correspondent banking.
6. PEXX (Southeast Asia/Africa)
Backed by Antler and TNB Aura, PEXX enables businesses to convert USDT/USDC balances to 27 fiat currencies via API. Its proprietary liquidity engine routes transactions through optimal corridors (e.g., SGD to NGN via XRP/USDC pairs), slashing processing times from days to 90 seconds.
Regional Market Leaders
7. Juicyway (Africa)
Operating stealthily until 2024, Juicyway powered $1.3B in stablecoin settlements for clients like Bolt and Afriex. The platform’s compliance layer auto-converts 30% of incoming USD to local stablecoins (e.g., Nigeria’s NGNx) to circumvent central bank forex restrictions.
8. Yellow Card (Pan-African)
With $33M in Series C funding, Yellow Card’s treasury management tools let 30,000+ African businesses hold reserves in USDC. Its partnership with Onafriq connects 500M mobile wallets across 35 countries, enabling Lagos-based exporters to receive euro payments as EURC.
Emerging Infrastructure Plays
9. Paxos-Stripe Integration
Stripe’s Pay with Crypto product now settles $780M monthly in USDC and PYUSD via Paxos’ enterprise API. Merchants like Shopify convert 62% of crypto payments to fiat instantly, while retaining 38% in stablecoins for supplier payments.