Stablecoin
Stablecoins are digital tokens designed to maintain a comparatively stable value relative to a reference asset, most often a national currency. The term describes a goal rather than a guarantee: the market price and redemption value can diverge, and the risks depend on the issuer, reserve assets, legal rights and stabilization mechanism.[1]
Stablecoins are used as settlement assets on cryptocurrency networks, as trading-pair denominations, as collateral in decentralized finance and, in some systems, for payments and treasury transfers. They differ from central bank digital currencies, which are liabilities of a central bank.
Stabilization models
Fiat-backed stablecoins
A centralized issuer accepts money or other reserve assets and issues tokens intended to be redeemable at a fixed rate, commonly one unit of currency per token. The quality, liquidity, custody and transparency of the reserves, together with the holder's legal redemption claim, determine much of the risk. Cash and short-term government securities generally behave differently under stress from commercial paper, loans or other less liquid assets.
Crypto-collateralized stablecoins
These systems lock cryptoassets in smart contracts and issue tokens against the collateral. Overcollateralization and automated liquidation are commonly used to absorb price changes. Holders remain exposed to collateral volatility, oracle failures, smart-contract defects, governance decisions and congestion during liquidations.
Algorithmic and hybrid designs
Algorithmic designs attempt to influence supply or demand without a full reserve of the referenced asset. Some combine partial reserves, a second token and market incentives. Their stability depends on continued demand and functioning arbitrage; reflexive loss of confidence can break the mechanism. A label such as “algorithmic” does not by itself describe the legal claim or complete risk profile.
Uses and limitations
Stablecoins can provide continuous on-chain settlement and reduce the need to move money through a bank for every crypto transaction. They may also support cross-border payments and programmable transfers. These benefits do not eliminate transaction fees, network delays, counterparty exposure or compliance obligations.
Important risks include a run on the issuer, reserve impairment, delayed or restricted redemption, operational and cyber incidents, loss of access to banking partners, blockchain or bridge failures, illicit-finance controls and uncertainty about insolvency treatment. A token that trades near its reference value in normal markets may still lose its peg during stress.
Regulation
Regulatory treatment varies by jurisdiction and by the functions performed. The Financial Stability Board recommends governance, risk management, disclosure, recovery planning and timely redemption at par for global arrangements referencing a single fiat currency.[2] The European Union's Markets in Crypto-Assets Regulation distinguishes asset-referenced tokens from electronic-money tokens and imposes issuer and reserve requirements.[3]
Hong Kong and HKDAP
Hong Kong's Stablecoins Ordinance established a licensing regime for issuers of fiat-referenced stablecoins on 1 August 2025. Distribution and marketing can also engage the rules applicable to regulated virtual-asset activities.[4]
In April 2026, the Hong Kong Monetary Authority licensed Anchorpoint Financial Limited to issue fiat-referenced stablecoins. Anchorpoint's proposed HKDAP token is designed to reference the Hong Kong dollar. In August, Standard Chartered Bank (Hong Kong) announced that it would be HKDAP's first bank distributor and described a phased rollout aimed at settlement, treasury and cross-border-payment uses.[5][6] Although news coverage described HKDAP as launched, Anchorpoint's own product page subsequently said that the stablecoin had not yet officially launched.[7] The distinction matters: a licence and distribution arrangement do not prove that a token is available to users. If issued, HKDAP would be an example of a regulated fiat-backed model, but regulation would not remove reserve, redemption, intermediary or operational risks.
See also
References
- ↑ High-level Recommendations for Global Stablecoin Arrangements, Financial Stability Board, 17 July 2023.
- ↑ High-level Recommendations for Global Stablecoin Arrangements, Financial Stability Board, 17 July 2023.
- ↑ Regulation (EU) 2023/1114 on markets in crypto-assets, Official Journal of the European Union.
- ↑ Implementation of regulatory regime for stablecoin issuers, Government of the Hong Kong Special Administrative Region, 29 July 2025.
- ↑ Circular on provision of Relevant Stablecoin service, Securities and Futures Commission, 2026.
- ↑ Standard Chartered becomes first bank distributor of HKDAP, Standard Chartered, 24 August 2026.
- ↑ HKDAP product notice, Anchorpoint Financial, accessed 27 August 2026.