Stablecoin is a cryptocurrency whose value is more stable than conventional cryptocurrencies. In another word, they are cryptocurrencies whose value is pegged or tied to another currency commodities or financial instruments. Usually, stablecoin is backed by other assets such as fiat money, gold, oil, etc.

Stablecoins aim to be an alternative to the high volatility of cryptocurrencies, include Bitcoin (BTC) that, makes crypto investments unsuitable for general transactions.

​The bitcoin system has coins that are classified as stablecoins.

It could be backed with fiat or a traded commodity (such as metals for example) because stablecoins price is steadier unlike other cryptocurrencies such as Bitcoin.

How does stablecoin work?

Stablecoins attempt to peg market capitalization to external references, usually fiat currency. They are more practical than cryptocurrencies which are more volatile as a medium of exchange

For example, The USDC currency is backed by the US dollar. Therefore, the value of USDC depends on the volatility and distribution of that currency. This depends on many factors such as politics, economy, supply-demand and many others.

The first stablecoin by market capitalization is Tether (USDT). Other well-known stablecoins are USD Coin (USDC), Binance USD (BUSD) and etc.

Discover more about blockchain crypto and compliance with our Glossary.

About Scorechain

Scorechain is a Risk-AML software provider for cryptocurrencies and digital assets. As a leader in crypto compliance, the Luxembourgish company has helped over 200 customers in 40 countries since 2015, ranging from cryptocurrency businesses to financial institutions with crypto trading, custody branch, digital assets, customers onboarding, audit and law firms, and some LEAs.

Scorechain solution supports Bitcoin analytics with Lightning Network detection, Ethereum analytics with all ERC20 tokens and stablecoins, Litecoin, Bitcoin Cash, Dash, XRP Ledger, Tezos, and Tron with TRC10 and TRC20 tokens. The software can de-anonymize the Blockchain data and connect with sanction lists to provide risk scoring on digital assets, transactions, addresses, and entities. The risk assessment methodology applied by Scorechain has been verified and can be fully customizable to fit all jurisdictions. 300+ risk-AML scenarios are provided to its customers with a wide range of risk indicators so businesses under the scope of the crypto regulation can report suspicious activity to authorities with enhanced due diligence.