Stablecoin

In plain words

A stablecoin is a cryptocurrency whose value is pegged to an ordinary currency or another asset. The idea is to combine the convenience of crypto infrastructure — fast transfers, round-the-clock operation — with the relative stability of familiar money, without sharp exchange rate swings.

The key question for any stablecoin is what backs the peg. The mechanisms vary: reserves in ordinary currency and government bonds, backing by other crypto assets, algorithmic designs. Whether the peg holds under stress depends on the quality of the backing, the transparency of the reserves and the existence of independent verification. The market’s history includes cases where it did not hold.

There are two practical points for investment immigration. First: state programmes, notaries and developers almost always require payment in ordinary money from the applicant’s bank account. Second, and more important: evidencing the source of crypto assets in due diligence is harder than for bank funds — a traceable history is needed from the source of income to conversion into ordinary currency.

Where it is encountered

What is important to check

How it looks in practice

1. 01Evidence the source of income
2. 02Keep the transaction history
3. 03Conversion through a regulated intermediary
4. 04Credit to a bank account
5. 05Programme payment from the bank

What you need to know

• The peg is backed in different ways and not always reliably
• Transparency of reserves is the key selection criterion
• Programmes usually require payment in ordinary money
• Banks analyse the source of crypto assets
• Transactions in crypto assets may have tax consequences

Common mistakes

• ✕Treating any stablecoin as risk-free
• ✕Not keeping the transaction history and the source of income
• ✕Converting through unregulated intermediaries
• ✕Planning to pay for a programme with crypto assets
• ✕Ignoring the tax consequences of transactions

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