What Is a Stablecoin?

What Is a Stablecoin?

A stablecoin is a type of digital asset designed to maintain a stable value, typically by being pegged to a reference asset such as a fiat currency. The most common stablecoins are pegged to the US dollar and aim to maintain a 1:1 value relationship. Unlike traditional cryptocurrencies that experience price volatility, stablecoins are structured to provide predictable value, making them suitable for payments, invoicing, and settlement.

Stablecoins operate on public blockchain networks, allowing value to be transferred globally without relying on traditional banking systems. This combination of price stability and blockchain-based settlement has led to widespread adoption across commercial, operational, and financial workflows.

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Why Stablecoins Exist

The original design of cryptocurrencies prioritised decentralisation and censorship resistance, but volatility limited their usefulness for everyday payments. Stablecoins were created to solve this problem by offering a digital asset that behaves more like cash while retaining the benefits of blockchain technology.

By maintaining a stable price, stablecoins allow businesses to transact without exposure to sudden market movements. This makes them practical for receiving payments, settling invoices, and managing cash flow in digital environments.

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How Stablecoins Maintain a Stable Value

Most stablecoins maintain their value through backing mechanisms. Fiat-backed stablecoins are supported by reserves such as cash or short-dated government securities held by regulated custodians. Each token in circulation represents a claim on these underlying reserves. Other stablecoins use digital asset collateral or algorithmic mechanisms to manage supply and demand. However, fiat-backed stablecoins are the most widely used in commercial settings due to their simplicity and transparency.

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Common Examples of Stablecoins

The most commonly used stablecoins globally and in Australia are USDT (Tether) and USDC (USD Coin). Both are fiat-backed stablecoins designed to track the US dollar and are supported across major blockchain networks, wallets, and payment infrastructure. These stablecoins are widely accepted by exchanges, payment platforms, and service providers, making them suitable for business use cases such as international payments and settlement.

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How Stablecoins Are Used by Businesses

Businesses use stablecoins to receive payments from international clients, pay suppliers, and manage settlement timing more efficiently. Stablecoins can be sent and received at any time, without being constrained by banking hours, weekends, or public holidays.

Invoicing with stablecoins allows businesses to specify a payment amount that remains consistent in value from issuance to settlement. This reduces reconciliation issues and improves cash flow visibility.

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Stablecoins vs Traditional Payment Methods

Traditional cross-border payment methods often involve multiple intermediaries, processing delays, and higher fees. Stablecoins settle directly on-chain, typically within minutes, and provide transparent transaction records. This efficiency makes stablecoins particularly attractive for businesses that operate internationally or rely on fast confirmation of inbound payments.

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Are Stablecoins Legal in Australia?

Stablecoins such as USDT and USDC are legal to use in Australia. While there is currently no dedicated stablecoin regulatory framework, stablecoin activity falls under existing digital asset and AML/CTF regulations. Businesses that provide stablecoin payment services or facilitate settlement to AUD must comply with AUSTRAC requirements, including identity verification and transaction monitoring.

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Why Stablecoins Are Increasingly Important

As global commerce becomes more digital, businesses require payment tools that are fast, predictable, and interoperable. Stablecoins meet these requirements by combining blockchain settlement with stable pricing.

For Australian businesses, stablecoins offer a practical way to engage in global trade, receive payments efficiently, and integrate modern payment infrastructure without relying solely on traditional banking rails.

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