Reduce cryptocurrency risk with stablecoins: USDN vs USDT vs USDC vs PAX vs USDJ

Stablecoins are cryptocurrencies designed to maintain a stable value relative to a reference asset, most commonly the US dollar. By removing the extreme price volatility that characterizes cryptocurrencies like Bitcoin and Ethereum, stablecoins serve as a reliable medium of exchange, store of value, and unit of account within the digital asset ecosystem. They have become fundamental infrastructure for cryptocurrency trading, decentralized finance (DeFi), cross-border payments, and the broader integration of blockchain technology with traditional finance.

Tether (USDT) is the oldest and largest stablecoin by market capitalization and trading volume. Launched in 2014, USDT is designed to maintain a 1:1 peg with the US dollar. Tether states that each USDT token is backed by reserves equal to or exceeding the number of tokens in circulation. However, Tether has faced persistent scrutiny over the composition and adequacy of its reserves. In 2021, the company settled with the New York Attorney General for $18.5 million over claims of misrepresenting its reserve backing. Despite these controversies, USDT remains the most widely traded stablecoin, with a market capitalization exceeding $130 billion as of early 2026, and it is available on virtually every major blockchain including Ethereum, Tron, Solana, and Avalanche. Notably, the MiCA regulation has created compliance challenges for Tether in European markets.

USD Coin (USDC) was launched in 2018 by Circle in partnership with Coinbase through the Centre consortium. USDC positions itself as a more transparent and regulated alternative to USDT. Circle publishes regular attestation reports from independent accounting firms verifying that USDC reserves consist of cash and short-term US Treasury securities. USDC operates on multiple blockchains including Ethereum, Solana, Algorand, and Base. It has become the preferred stablecoin for institutional use, DeFi protocols, and regulated financial applications, with a market capitalization of approximately $45 billion in early 2026.

Paxos Standard (now Pax Dollar, USDP, formerly PAX) is a regulated stablecoin issued by Paxos Trust Company, which is chartered as a trust company by the New York State Department of Financial Services. USDP reserves are held in segregated accounts at US banks and backed entirely by cash and cash equivalents. Paxos previously issued the Binance USD (BUSD) stablecoin on behalf of Binance, but regulatory actions by the New York Department of Financial Services in 2023 led Paxos to stop minting new BUSD tokens, and the supply has since wound down substantially.

USDN (Neutrino USD) was an algorithmic stablecoin created on the Waves blockchain. Unlike fiat-collateralized stablecoins, USDN used a crypto-collateralized mechanism where WAVES tokens served as backing. In 2022, USDN lost its dollar peg and traded significantly below $1 for extended periods, highlighting the risks inherent in algorithmic and crypto-collateralized stablecoin designs. The collapse of Terra's UST stablecoin in May 2022, which erased approximately $40 billion in value, further demonstrated that algorithmic stablecoins face fundamental challenges in maintaining their pegs during market stress.

USDJ is a stablecoin on the TRON blockchain, created through the JUST protocol. Similar to MakerDAO's DAI on Ethereum, USDJ is generated by depositing TRX as collateral into smart contracts called Collateralized Debt Positions (CDPs). The system maintains the peg through over-collateralization and automated liquidation mechanisms. USDJ occupies a niche position within the TRON ecosystem but has not achieved the scale or adoption of the major stablecoins.

The primary use case for stablecoins is facilitating cryptocurrency trading. Traders use stablecoins to move quickly between volatile assets and a stable reference value without converting back to fiat currency, which can be slow and involve banking intermediaries. On most cryptocurrency exchanges, stablecoin trading pairs (such as BTC/USDT or ETH/USDC) are the most liquid markets. Stablecoins also enable 24/7 settlement, unlike traditional banking systems that operate on business hours and weekday schedules.

In decentralized finance (DeFi), stablecoins serve as the primary unit of account for lending, borrowing, and yield farming protocols. Users can deposit stablecoins into lending protocols to earn interest, borrow against crypto collateral in stablecoin terms, and provide liquidity to decentralized exchanges. The stability of stablecoins makes DeFi protocols more predictable and useful for participants who want exposure to yield opportunities without the additional risk of underlying asset volatility.

Cross-border payments and remittances represent a growing use case for stablecoins. Sending USDC or USDT across blockchains can be faster and cheaper than traditional wire transfers, especially for corridors where banking infrastructure is limited. Companies like Circle and Stellar have built payment networks that leverage stablecoins for international transactions, and several countries are exploring how stablecoins might complement or integrate with their domestic payment systems. For individuals and businesses alike, the ability to transact across borders without intermediation by large banking networks represents a meaningful step toward financial autonomy, particularly in regions where access to the traditional financial system is limited or expensive.

Regulation of stablecoins has become a major focus for governments worldwide. The United States has been working on comprehensive stablecoin legislation, with proposals requiring issuers to maintain full reserve backing, submit to regular audits, and obtain banking or trust company charters. The EU's Markets in Crypto-Assets (MiCA) regulation, which took effect in 2024, imposed a regulatory framework on stablecoins (called "e-money tokens" and "asset-referenced tokens") across EU member states, adding significant compliance burdens for issuers operating in European markets. These regulatory efforts aim to bring stablecoin issuers under the same kind of oversight as traditional financial institutions, though critics argue they risk stifling innovation and driving activity to less regulated jurisdictions rather than genuinely empowering individual users.

The risks associated with stablecoins vary by design. Fiat-collateralized stablecoins like USDT and USDC depend on the issuer's ability to maintain adequate reserves and honor redemptions. Crypto-collateralized stablecoins like DAI and USDJ face liquidation cascades during sharp market downturns. Algorithmic stablecoins, which attempted to maintain their pegs through supply-and-demand mechanisms without full collateral, have largely been discredited after multiple high-profile failures. Understanding these risk profiles is essential for anyone using stablecoins as part of their financial strategy.

Looking ahead, stablecoins are likely to play an increasingly central role in both the crypto economy and the broader financial system. Central Bank Digital Currencies (CBDCs), which several countries are developing, may complement or compete with private stablecoins. The integration of stablecoins with traditional payment networks, banking systems, and financial applications continues to accelerate, suggesting that the boundary between digital assets and traditional finance will continue to blur in the years ahead.

Stablecoin, Volatility, Risk, Cryptocurrencies