Stablecoin vs Cryptocurrency: What’s the Difference?

• January 6, 2026
• Benjamin Richard
• Blog

Digital assets include various token types, but not all are the same. The term “cryptocurrency” broadly refers to blockchain-based digital assets that can vary widely in design and purpose. Stablecoins are a specific type of crypto asset engineered to maintain price stability.

What Are Cryptocurrencies?

Cryptocurrencies are digital assets that use cryptography and distributed ledger technology, most commonly blockchain. Their value is typically determined by market supply and demand rather than by reference to an external asset.

Many cryptocurrencies, such as Bitcoin, experience significant price volatility because their prices fluctuate based on trading activity, adoption trends, and broader market sentiment. Traditional cryptocurrencies often operate without a central authority and rely on decentralised consensus mechanisms, such as proof-of-work, to validate transactions and secure the network.

Cryptocurrencies are commonly used for investment and speculation due to their potential for price appreciation or loss. Some holders treat them as a store of value, with Bitcoin often described as “digital gold.” They are also used to participate in decentralised finance ecosystems, where tokens enable access to protocols, governance, and network functions.

What Are Stablecoins?

Stablecoins are a type of cryptocurrency designed to maintain a stable value relative to an external asset, typically a fiat currency, such as the U.S. dollar. This stability differentiates them from most other cryptocurrencies.

Fiat-backed stablecoins maintain their peg by holding reserves of fiat currency or highly liquid assets. Crypto-backed stablecoins rely on over-collateralisation, using other cryptocurrencies to absorb price fluctuations. Algorithmic stablecoins use programmed mechanisms to adjust supply and demand in an attempt to keep value steady.

Across these models, stablecoins are designed to offer price stability, reducing the fluctuations that are common in other cryptocurrencies.

Primary Use Cases

Stablecoins are commonly used as a medium of exchange within blockchain ecosystems, where predictable value is important. They are widely used for settling trades on crypto platforms and for providing liquidity in on-chain transactions where price certainty matters.

Trade Settlement and Market Liquidity

Stablecoins are widely used to settle trades on both centralised and decentralised crypto platforms. By providing a stable unit of account, they allow traders and institutions to move capital quickly between assets without converting back into fiat. This improves market liquidity, reduces settlement delays, and enables continuous trading across global time zones without banking cut-off constraints.

Cross-Border Payments and Remittances

Stablecoins are increasingly used for cross-border transfers due to their speed and cost efficiency. Traditional international payments often involve multiple intermediaries, currency conversions, and long settlement times. Stablecoins allow value to be transferred directly on-chain, often settling within minutes, making them attractive for international trade, remittances, and global payroll use cases.

On-Chain Payments and Merchant Transactions

Stablecoins enable digital payments within blockchain-based platforms while maintaining fiat price stability. Merchants, service providers, and platforms can accept payments without exposure to crypto volatility, while users benefit from instant settlement and transparent transaction records. This makes stablecoins suitable for subscription payments, digital services, and B2B settlements conducted on-chain.

Treasury Management and Cash Preservation

Businesses and investors use stablecoins as a digital store of value to manage short-term liquidity. Holding stablecoins allows organisations to preserve capital value while maintaining immediate access to funds for transactions, investments, or operational expenses. This is particularly useful in markets where access to stable banking infrastructure is limited or where currency volatility is high.

Lending, Borrowing, and Yield Generation

In decentralised finance ecosystems, stablecoins are commonly used as the primary asset for lending and borrowing. Their predictable value allows borrowers to understand repayment obligations clearly, while lenders can earn yield without exposure to large price swings. Stablecoins also serve as collateral in structured financial products that require consistent valuation.

Programmable Payments and Smart Contract Automation

Stablecoins can be integrated into smart contracts to enable automated, rule-based payments. These include scheduled disbursements, milestone-based releases, escrow arrangements, and conditional settlements. By combining stable value with programmable logic, stablecoins support more efficient and transparent financial workflows.

Tokenised Asset Settlement

Stablecoins are often used to settle transactions involving tokenised real-world assets such as commodities, invoices, or securities. They provide a stable settlement layer that complements digital asset ownership, enabling faster clearing and reducing counterparty risk in asset exchanges.

Financial Inclusion and Access to Digital Finance

Stablecoins provide access to digital financial services for users who may not have reliable banking access. With only a mobile device and internet connection, individuals and small businesses can store value, make payments, and participate in digital commerce using stablecoins denominated in familiar currencies.

Stablecoin vs Cryptocurrency: Key Differences

One of the main differences between stablecoins and cryptocurrencies is price behaviour. Cryptocurrencies such as Bitcoin can experience large price swings, while stablecoins aim to maintain a stable value relative to a pegged asset.

The difference in purpose is equally important. Cryptocurrencies are often used for speculation, as stores of value, or for participation in decentralised networks. Stablecoins, by contrast, are designed to function as a stable medium of exchange that avoids large price movements.

There is also a distinction in how value is supported. Stablecoins typically depend on backing assets or algorithmic mechanisms to maintain their value, whereas many cryptocurrencies rely on decentralised consensus rather than any form of backing.

In financial ecosystems, stablecoins tend to integrate into payment rails and liquidity infrastructure because of their stability. Cryptocurrencies more often attract holders focused on investment potential or technological decentralisation.

 

Features	Stablecoins	Cryptocurrency
Value Stability	Pegged to an external asset (fiat, crypto, or commodity) to minimise volatility.	Value fluctuates based on market demand and supply, leading to high volatility.
Purpose	Medium of exchange, facilitating transactions, stability within the crypto ecosystem.	Store of value, speculative investment, potential for decentralised applications.
Centralization	Varies. Some are centralized (fiat-backed), others are decentralised (algorithmic).	Generally decentralised.
Use Cases	Daily transactions, remittances, DeFi applications, trading.	Long-term investment, store of value, potential for use in decentralised applications, and digital gold.
Regulatory Scrutiny	Growing Regulatory scrutiny due to ties to fiat currencies.	Varied regulatory scrutiny, depending on the region.
Examples	USDT (Tether), USDC (USD Coin), DAI (Decentralised)	Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC)
Risk Level	Generally considered lower risk, though some forms (like algorithmic stablecoins) can be riskier.	Higher risk due to extreme market fluctuations.

 

Stablecoin vs Cryptocurrency: Use Cases in Practice

Stablecoins are commonly used for everyday payments, as their stable value makes them easier to use for transactions. They are also used for cross-border transfers, where they can reduce cost and settlement time compared with traditional systems. On exchanges, stablecoins serve as trading pairs and temporary holdings because they minimise exposure to volatility.

Cryptocurrencies such as Bitcoin are frequently used for investment and speculation, where price volatility creates opportunities for gains or losses. Some individuals also use cryptocurrencies for wealth diversification or as a store of value, particularly in environments where fiat currencies are less stable.

Risk Profiles and Considerations

Stablecoins are generally less volatile, but they rely on reserve management, issuer guarantees, and regulatory oversight. If reserves are poorly managed or governance is weak, a stablecoin may lose its peg, as seen in past algorithmic stablecoin failures.

Cryptocurrencies carry higher market risk due to volatility, but they do not depend on a central issuer to maintain price stability. Their decentralised nature means there is no single entity responsible for managing value.

Stablecoin vs Cryptocurrency: How They Fit Into the Broader Digital Finance Landscape

Stablecoins are increasingly discussed in regulatory frameworks because of their growing use in payments and their potential systemic impact. Cryptocurrencies remain central to discussions about decentralisation, financial innovation, and speculative markets.

Conclusion

Stablecoins and cryptocurrencies are related but distinct. Stablecoins aim to provide predictable value, while cryptocurrencies such as Bitcoin do not. Choosing between them depends on intended use — stablecoins are suited to steady transactions and liquidity needs, while cryptocurrencies are more commonly used for investment or decentralised network participation.