A stablecoin is a token on a blockchain that the issuer promises to redeem at a fixed rate, typically one US dollar. Regulated issuers back each token with reserves of cash, bank deposits and short-dated Treasury bills, and publish attestations of those reserves. Because the token lives on a public network, it can move between parties in seconds, at any hour, and be used inside smart contracts.
The risks are those of a narrow bank or a money market fund. If holders doubt the reserves, they redeem at once, and a run on a token can move faster than a run on a bank. The BIS argues that stablecoins also fail the test of singleness, because a dollar token from one issuer may not always trade at par with another or with a bank deposit.
The US GENIUS Act, the EU’s MiCA regulation and the MAS framework all set reserve, redemption and disclosure rules. A regulated stablecoin and a bank’s tokenised deposit look alike on a screen, but only the deposit is a claim on a bank’s balance sheet.