When people hear "cryptocurrency," many may picture highly volatile assets like Bitcoin or Ethereum. However, there is a category of crypto assets known as "stablecoins," which are designed to maintain a stable price.
Stablecoins primarily peg their value to fiat currencies such as the US dollar or Japanese yen, keeping their price nearly constant—for example, 1 USD = 1 USDT or 1 JPY = 1 JPYC. As a result, they are widely used as a foundation for crypto trading, as well as for payments and remittances.
As of 2026, the global stablecoin market has reached approximately $320 billion (about ¥48 trillion), with USDT (Tether) and USDC accounting for roughly 83% of the market. In Japan, the first yen-denominated stablecoin, "JPYC," was officially issued in October 2025, and with the launch of USDC lending through SBI VC Trade, the market is entering a full-scale adoption phase.
How Stablecoins Work and Their Types
Stablecoins are categorized into several types based on the mechanism used to stabilize their price.
Fiat-Collateralized Stablecoins
The most common type, where the issuer holds fiat currency reserves (such as the US dollar or Japanese yen) as backing to issue stablecoins. For example, for every 1 USDT issued, the issuer holds $1 worth of reserves. Notable examples include USDT (Tether), USDC, and JPYC.
Crypto-Collateralized Stablecoins
A type where users deposit cryptocurrencies as overcollateralization, and stablecoins are issued based on that value. A prime example is DAI (MakerDAO), which is issued using cryptocurrencies like Ethereum as collateral. To absorb price volatility risks, the collateralization ratio is typically set at 150% or higher.
Algorithmic Stablecoins (Non-Collateralized)
A type that stabilizes prices through supply-demand adjustments via smart contracts. While they do not require reserves, they are considered high-risk, as seen in the past collapse of UST (TerraUSD). Currently, their market presence is limited.
Use Cases for Stablecoins
Stablecoins serve as the foundation for cryptocurrency trading and decentralized finance (DeFi).
- Base Currency for Crypto Trading: When buying or selling Bitcoin or altcoins on exchanges, converting to stablecoins first allows you to trade while avoiding price volatility risk.
- International Remittances and Payments: Stablecoins enable low-cost, high-speed transfers without banks, making them a popular option for cross-border payments.
- DeFi (Decentralized Finance) Applications: They are used for lending stablecoins to earn interest or providing liquidity to generate yields.
- Store of Value: When cryptocurrency prices plummet, you can temporarily move assets into stablecoins to protect your capital.
In Japan, you can buy and trade stablecoins like USDT, USDC, and JPYC on domestic exchanges. Since each exchange offers different supported assets and fee structures, refer to our cryptocurrency exchange comparison to find the platform that best suits your needs.
Risks of Stablecoins
Although stablecoins maintain price stability, they carry the following risks:
- Issuer credit risk: For fiat-collateralized stablecoins, it is crucial whether the issuer properly manages reserves. There have been past cases where reserve transparency became an issue.
- Peg deviation risk: Due to market supply and demand fluctuations or issuer-related issues, the price of a stablecoin may deviate significantly from $1 or ¥1.
- Regulatory risk: Stricter regulations in various countries may impose restrictions on the trading and issuance of stablecoins. In Japan, the revised Payment Services Act has strengthened regulations on issuers.
- Hacking and smart contract risk: For crypto-collateralized and algorithmic stablecoins, there is a risk of hacking attacks exploiting vulnerabilities in smart contracts.
- Principal loss risk: If you invest in stablecoins, a price decline could result in a loss of principal. Algorithmic stablecoins, in particular, are considered to carry a high risk of a crash.
Summary
Stablecoins are becoming an indispensable part of the cryptocurrency market. Leveraging their stability pegged to fiat currencies, they are used in various scenarios such as trading, payments, and DeFi. However, there are many points to be cautious about when investing, including the credit risk of the issuer and regulatory risks.
When using stablecoins, it is recommended to fully understand their mechanisms and risks, choose a reliable exchange, and start with a small amount if necessary. Tax systems and transaction availability vary by country and region, so be sure to check the latest information.
Risk and Disclosure
Risk: Crypto assets are highly volatile and carry the risk of losing your entire principal. This article is a general explanation based on information as of 2026-07-18 and does not constitute investment solicitation, advice, or a recommendation of specific assets. Trading eligibility and tax treatment vary by country/region, so please be sure to check the regulations in your country of residence and the latest terms of each exchange before use.
Affiliate Disclosure: This article may contain advertising (affiliate) links, and our site may receive compensation at no additional cost to the reader. Compensation does not affect our evaluation content.
Frequently Asked Questions
What is a stablecoin?
A stablecoin is a cryptocurrency designed to maintain a stable value by pegging it to a fiat currency like the US dollar or Japanese yen. For example, 1 USDT targets $1, and 1 JPYC targets ¥1.
What are the main types of stablecoins?
The main types are fiat-collateralized (USDT, USDC, JPYC), crypto-collateralized (DAI), and algorithmic stablecoins. Currently, fiat-collateralized stablecoins are the most common.
What are the risks of stablecoins?
Risks include issuer credit risk, de-pegging risk, regulatory risk, hacking risk, and principal loss risk. Algorithmic stablecoins are considered particularly prone to crashes.
Which stablecoins can I buy in Japan?
In Japan, USDT, USDC, and JPYC are available on major exchanges. In October 2025, JPYC, the first yen-denominated stablecoin, was officially issued domestically.
Are stablecoins safe?
While stablecoins offer price stability, they carry risks such as issuer credit risk and regulatory risk. Investment decisions should be made with full understanding of these risks and at your own responsibility.
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