Definition
Stablecoin
A stablecoin is a cryptocurrency designed to hold a steady value, usually pegged to a fiat currency like the US dollar, through reserves or algorithms. This is informational, not advice.
A stablecoin aims to minimise price volatility by tracking a reference value, most often a major fiat currency. Some are backed by reserves of cash and equivalents, others by crypto collateral, and some attempt to maintain the peg algorithmically.
Stablecoins are used within crypto markets for trading, transfers and as a parking place between trades. However, pegs can break — algorithmic and under-reserved stablecoins have collapsed, causing severe losses.
In India, stablecoins are still VDAs for tax purposes, so the 30% tax and 1% TDS apply on transfers. They are not the same as the RBI's CBDC. This entry is informational only and not investment advice; risks include de-pegging and counterparty failure.
Related terms
- Central Bank Digital Currency (CBDC)A Central Bank Digital Currency is a digital form of a country's sovereign currency issued by the central bank; in India it is the RBI's Digital Rupee (e₹).
- CryptocurrencyA cryptocurrency is a digital asset that uses cryptography and a blockchain to record transactions without a central authority; in India it is a taxed VDA, not legal tender. This is informational, not advice.
- Crypto ExchangeA crypto exchange is a platform where users buy, sell and trade cryptocurrencies; Indian exchanges register as reporting entities and deduct 1% TDS. This is informational, not advice.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.