The Ultimate Guide to Stablecoins

• January 29, 2026
• Benjamin Richard
• Blog

Stablecoins are a category of digital currency designed to maintain a stable value, typically pegged to a traditional fiat currency such as the US Dollar (USD) or the Malaysian Ringgit (MYR). Unlike volatile digital assets, stablecoins aim to combine the efficiency and programmability of blockchain technology with the predictability of conventional money.

This stability makes stablecoins particularly well suited for real economic activity. While early cryptocurrencies were primarily speculative or experimental in nature, stablecoins address one of the most significant barriers to adoption: price volatility. Assets like Bitcoin can fluctuate dramatically in short periods, making them impractical for payroll, invoicing, trade settlement, or savings. Stablecoins, by contrast, are engineered for consistency.

Over the past 18 months, the stablecoin market has expanded rapidly. Total market capitalisation has more than doubled to approximately USD 250 billion, reflecting growing institutional, enterprise, and governmental adoption. Industry forecasts now project the market could reach USD 2 trillion by 2028, driven by cross-border trade, tokenised assets, and programmable financial infrastructure.

How Do Stablecoins Work?

At the core of stablecoin design is collateralisation. The most widely adopted stablecoins are fiat-backed and custodial in nature. These digital assets are issued by private entities as blockchain tokens and pegged at a fixed ratio to a reference asset, most commonly a fiat currency.

In a typical fiat-backed model, every unit of stablecoin in circulation is supported 1:1 by reserves held off-chain. These reserves usually consist of cash deposits and highly liquid, low-risk instruments such as short-term government securities. For example, USD-pegged stablecoins frequently hold US Treasury bills, while MYR-based models rely on Malaysian government bonds. This reserve structure ensures that holders can redeem the stablecoin for the underlying fiat asset at any time.

It is important to note that stablecoins are not legal tender. Their value stability is contractual and operational rather than statutory, resting on reserve transparency, governance, and redemption mechanisms.

Stablecoins are not limited to fiat pegs. Bhutan, for instance, has recently introduced a gold-backed digital token, demonstrating how stability can also be achieved through non-fiat collateral. In such cases, the stablecoin derives its value from the underlying commodity rather than a national currency.

Types of Stablecoin Models

Fiat-Backed (Custodial) Stablecoins

This is the dominant global model and includes assets such as USDT, USDC, and RMJDT. These stablecoins are backed 1:1 by fiat currency or short-term securities held in segregated reserve accounts. The model depends on trust in the issuer’s governance, transparency, and reserve management, but has proven to be the most resilient and widely adopted structure to date.

Algorithmic and Hybrid Stablecoins

Algorithmic models attempt to maintain price stability through smart contracts that automatically adjust token supply based on market demand. While attractive in theory due to their decentralised design, these models have historically demonstrated fragility under stress. Several high-profile failures have shown that purely algorithmic mechanisms struggle to withstand sharp market shocks, making them unsuitable for systemic or sovereign use.

Bank-Integrated and Tokenised Deposits
An emerging category involves traditional banks issuing tokenised representations of existing deposits. These assets typically operate on permissioned ledgers and remain fully within the banking system. This model enables programmable settlement, atomic delivery-versus-payment, and fractional ownership of tokenised Real-World Assets (RWAs), bridging conventional finance with blockchain infrastructure.

What Are the Benefits of Stablecoins?

Stablecoins deliver tangible advantages over legacy payment and settlement systems.

They operate continuously, settling transactions 24 hours a day, seven days a week. Unlike traditional banking rails that close on weekends and public holidays, stablecoin networks function without interruption, enabling near-instant transfers.

Cost efficiency is another major advantage. By reducing reliance on correspondent banks, clearing houses, and intermediaries, stablecoin transfers are significantly cheaper. In cross-border contexts, some providers using stablecoin infrastructure charge as little as one-fifth of the fees associated with traditional remittance channels.

Stablecoins also introduce a new level of transparency and control. Blockchain-based settlement allows transactions to be tracked in real time, while programmable compliance logic enables automated checks for Anti-Money Laundering (AML) and Know-Your-Customer (KYC) requirements.

Their wallet-based architecture expands global access to financial services. Users do not need a traditional bank account to hold or transfer stablecoins, which is particularly impactful in regions where banking penetration is limited.

Finally, stablecoins unlock business innovation. Through smart contracts, they support automated settlement, programmable escrow, tokenised collateral, and dynamic portfolio management, features that are difficult or impossible to implement in legacy systems.

Cross-Sector Applications of Stablecoins

Consumer and Retail Use

For consumers, stablecoins offer faster, safer, and more efficient transactions than traditional payment rails. Where permitted, they provide a compelling alternative for remittances, significantly reducing transfer time and cost.

A Malaysian based stablecoin is positioned to support domestic transfers and remittance flows, aligning with the ambition to become a standard settlement asset for crypto-based payments in Malaysia.

Business and Enterprise (B2B) Use

In enterprise contexts, stablecoins enable near-instant global trade settlement. It can provide compliant settlement for B2B transactions, bypassing multi-day correspondent banking delays.

Stablecoins also function as the transactional cash layer for Real-World Asset tokenisation and Supply Chain Finance. Assets can be tokenised in a secure, enterprise-grade environment, with stablecoins providing the regulated settlement mechanism.

Programmable settlement further enables atomic transactions linked to verified real-world conditions, dramatically reducing counterparty risk and reconciliation friction.

Government and Public Sector Use

Stablecoins can serve as an instrument of national economic strategy. It supports FDI attraction, tests local fiat tokenisation, and demonstrates how regulated private-sector innovation can coexist with sovereign oversight.

The insights generated from stablecoin deployment may inform future Central Bank Digital Currency (CBDC) initiatives or act as a bridge to wholesale CBDC systems.

Conclusion

Stablecoins have evolved from niche crypto instruments into foundational components of the modern digital economy. As global trade, finance, and public infrastructure become increasingly tokenised, stablecoins provide the stability, programmability, and interoperability required for real-world adoption.

Malaysia’s RMJDT illustrates how a stablecoin can function not merely as a payment tool, but as a strategic national asset, reinforcing sovereign infrastructure while enabling global participation in the digital economy.