Glossary

What are Stablecoins? Why Not Just Use US Dollars?

FoxPress Editorial · 2026-04-22 · 13 min read

Stablecoins are crypto assets pegged to fiat currencies. Most beginners will encounter them during their very first deposit. Your first trade on the Binance Official Website will likely involve a stablecoin like USDT. On the Binance Official APP, almost all major trading pairs use stablecoins as the base currency. For regional switching instructions, refer to Binance App Download. Let's analyze stablecoins.

One-Sentence Definition

Stablecoins = The "USD equivalent" of the crypto world; tokens designed to maintain a stable value near $1 USD.

Major Stablecoins

Name	Issuer	Peg	Market Cap
USDT	Tether	1 USDT = 1 USD	Largest
USDC	Circle	1 USDC = 1 USD	Second Largest
DAI	MakerDAO	Algorithmic + Collateral	Medium
BUSD	Paxos	1 BUSD = 1 USD	Gradually retired
FDUSD	First Digital	1 FDUSD = 1 USD	Medium (Promoted on Binance)

Beginners should primarily use USDT for its high liquidity.

Why Do We Need Stablecoins?

1. Medium of Exchange

Foundational crypto assets like BTC and ETH are highly volatile. Every trade needs a stable "anchor":

BTC/USDT trading pair.
ETH/USDT trading pair.
Almost every coin is paired against USDT.

2. Risk Mitigation (Hedging)

When the market is bearish:

Sell your coins for stablecoins.
Keep funds in the crypto ecosystem (to avoid bank freezing issues).
Wait for the market to recover before buying back in.

3. Cross-Platform Transfers

Transferring funds between exchanges (e.g., Binance to OKX) or to your own wallet is often cheaper using stablecoins than using BTC or ETH due to lower network fees.

4. DeFi Foundation

Decentralized Finance (DeFi) lending and liquidity mining mostly rely on stablecoins for value measurement.

How Stablecoins Stay "Stable"

Type 1: Fiat-Collateralized (USDT, USDC, FDUSD)

The issuer keeps $1 USD in a bank for every token issued.
Users can theoretically redeem the token for $1 USD.
Transparency depends on the issuer's audits.

Type 2: Crypto-Collateralized (DAI)

Backed by crypto assets like ETH.
DAI is issued via algorithms.
Collateralization ratio is > 100% (e.g., 150%) to account for volatility.
Fully decentralized.

Type 3: Algorithmic Stablecoins (Mostly Failed)

No collateral.
Maintained via supply-demand algorithms.
Prone to a "death spiral" in extreme conditions (e.g., the UST collapse in 2022).

Beginners should stick to fiat-collateralized types like USDT, USDC, or FDUSD.

Can Stablecoins "De-peg"?

Historically, stablecoins have occasionally lost their peg:

2018: USDT briefly dropped to $0.92.
2023: USDC briefly dropped to $0.87 (during the Silicon Valley Bank event).
Most recover back to $1.00 within days.

How beginners should handle a de-peg:

Diversify your holdings (e.g., hold both USDT and USDC).
Don't panic sell during a de-peg event.
Wait for the market to stabilize.

USDT vs. USDC Comparison

Feature	USDT	USDC
Transparency	Moderate	High
Regulation	Moderate	US Regulated
Liquidity	Extremely Wide	Mostly Western Markets
Merchant Support	100% (P2P/C2C)	Partial
Ease of Cashing Out	High (Global)	Moderate

For most international beginners, USDT remains the default choice for convenience.

What is FDUSD?

Binance has recently promoted FDUSD as an alternative to USDT:

Issued by First Digital.
Hong Kong regulated.
Many trading pairs on Binance.
Occasionally offers trading rewards.

It's good to know, but USDT remains the most practical choice for beginners.

Risks of Stablecoins

Risk 1: Issuer Risk

The issuer could go bankrupt, lack sufficient reserves, or be delisted due to regulatory pressure.

Strategy: Don't keep all your assets in stablecoins. Balance between long-term BTC/ETH holdings and short-term stablecoin liquidity.

Risk 2: Network Risk

USDT on certain blockchains could be frozen or paused.

Strategy: Don't rely on a single blockchain for all your holdings.

Risk 3: Regulation

Future regulations could restrict or even ban certain stablecoins.

Strategy: Stay informed about crypto policy changes.

Best Use Cases for Stablecoins

Scenario	Recommendation
On-ramping (Buying in)	USDT
Long-term "Safe Haven"	Don't hold 100% in stablecoins forever.
Cross-chain Transfer	Use the cheapest network (e.g., TRC20).
Savings/Earn	1–3% Flexible APR.
Active Trading	Essential.

Earning "Interest" on Stablecoins

Binance Earn offers programs for stablecoins:

Flexible: 1–5% APR.
Fixed: 5–10% APR.
High Risk: 10%+ APR.

Beginners should stick to small amounts in Flexible Earn to earn some yield without locking up funds. Avoid chasing excessively high yields as they are often unsafe.

Common Misconceptions

1. "Stablecoins = Absolutely Safe"

Issuer risk, network risk, and regulatory risk always exist.

2. "USDT is Always Exactly $1"

It has de-pegged occasionally in the past.

3. "50% APR on Stablecoins is Safe"

Extremely high yields are usually a sign of high-risk or unsustainable products.

4. "All Stablecoins are the Same"

The risk profile of USDT vs. USDC vs. DAI vs. UST is vastly different.

A Beginner's Guide to Using Stablecoins

Prioritize USDT for deposits (it has the highest P2P merchant acceptance).
Hold stablecoins when you are not actively trading to avoid volatility.
Avoid keeping more than 30% of your total assets in stablecoins for the long term.
Use Flexible Earn for a bit of extra yield on your balance.
Use the most cost-effective network for transfers.

FAQ

Q: Are stablecoins Central Bank Digital Currencies (CBDCs)?
A: No. Stablecoins are issued by private companies. CBDCs are issued and backed by national central banks.

Q: Can I use USDT to shop on Amazon?
A: Not directly. Amazon does not currently accept crypto.

Q: Will the price of a stablecoin rise?
A: No. It is pegged to $1 USD and should always stay near that value.

Q: Can I hold stablecoins to survive a crypto bear market?
A: Yes, you avoid the price drops of BTC/ETH. However, you still carry the issuer risk of the stablecoin.