Explanation
Stability comes from the reserve, not from the blockchain. Under MiCA, issuers of euro stablecoins must hold reserves at European banks and report monthly.
Three types, three risks
The first type is fully backed by cash and short-term government paper: every coin issued matches a euro or dollar in an account. The second is backed by other crypto, over-collateralised to absorb swings. The third, the algorithmic kind, tries to hold the peg through smart contracts and trading incentives — that model collapsed spectacularly with Terra/UST in 2022.
What people use them for
Stablecoins are the unit of account of the crypto market: prices are quoted in them, traders park profits in them, and international payments run over them because a transfer takes minutes instead of days. For businesses with suppliers outside the EU that is a concrete advantage; for savers they are not savings accounts, since there is no deposit guarantee and usually no interest.
MiCA and euro stablecoins
Under MiCA, issuers of e-money tokens must hold reserves one-to-one at credit institutions, report monthly and redeem at par on request. That opened the way for regulated euro stablecoins and simultaneously pressured dollar stablecoins that fail the requirements.
Key takeaways
- Check who the issuer is and what the reserve holds.
- No deposit guarantee, not a savings account.
- Redemption at par is the core promise.
Frequently asked questions
+Can a stablecoin go to zero?
Yes, that has happened repeatedly with algorithmic and poorly backed coins. With fully backed, regulated issuers the risk is small but not zero.
+Do I pay tax on stablecoins?
Swapping crypto into a stablecoin is a sale for tax purposes. In both Belgium and the Netherlands that step counts, even if no euros hit your bank account.