Stablecoins
A “stablecoin” is a type of crypto asset that aims to maintain its value stable by reference to another value or asset such as the dollar or the euro.
Despite being called “stablecoins”, in some cases they do not show permanent stability in their price, although in others the volatility with respect to the referenced asset is minimal. In any case, they cannot be considered legal tender because they are not accepted as a means of payment. However, the new European regulatory framework allows the issuance of stablecoins as electronic money, which would be accepted as such.
A “stablecoin” is a type of crypto asset whose value is “pegged” to a legal tender currency, such as the euro or the dollar, or another type of asset such as gold, oil or other crypto assets. In other words, it references the value of another asset (financial or otherwise) and aims to maintain its value stable relative to that asset through various mechanisms.
One function of “stablecoins” is to allow people to buy and sell crypto assets without having to perform additional transactions to exchange their crypto assets for legal tender (i.e., they act as a means of payment within a crypto ecosystem).
Types of stablecoins:
Pegged to a country's official country:
In this case, the issuer of the stablecoin guarantees the stability of the coin’s price by buying/selling the reserve asset to which the coin’s value is pegged. According to European regulations (MICA Regulation), the holder of that “stablecoin” is entitled to receive the value of the referenced asset at any time (i.e., if the “stablecoin” is intended to maintain its value by reference to the euro, the holder of the “stablecoin” can obtain reimbursement of the nominal amount equivalent to the euros that the stablecoin is worth). In the MiCA Regulation, these types of crypto-assets are called “electronic money tokens” and may only be issued by duly authorised and supervised credit institutions or electronic money institutions.Asset-referenced:
a type of “stablecoin” different from the above, which aims to maintain a stable value referenced to another asset or right, or a combination of both, including one or more official currencies of a country. In the MiCA Regulation, this type of crypto asset is referred to as “Electronic Money tokens” (EMT). The price stabilisation mechanism of the stablecoin works in a similar way to the previous one. Its issuance is permitted to credit institutions and issuers duly authorised by the Bank of Spain in accordance with the provisions of the Regulation. However, it should be noted that there are other stablecoins, which may be found outside the European Union, that use this model without the requirements established in the MiCA Regulation and therefore carry certain risks.Algorithmic:
a type of “stablecoin” that aims to maintain a stable value relative to an official currency or one or more assets through automated algorithms that anticipate increases or decreases in the supply of such crypto assets in response to changes in demand. These coins fail to remain stable and carry a very high risk.