StablecoinsIntermediate

Risks of Holding Stablecoins

Real risks to understand before treating a stablecoin as equivalent to holding cash.

5 min readPublished 2026-09-25

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Depegging risk
Issuer and counterparty risk
Other risks to be aware of
What to remember

Key takeaways

What to remember

Stablecoins carry real depegging risk, documented in past cases.
Fiat-collateralized designs introduce issuer/counterparty risk.
Regulatory, smart contract, and liquidity risks also apply.
A stablecoin is not equivalent to insured cash in most jurisdictions.

Depegging risk

A stablecoin can temporarily or permanently lose its intended peg, trading at a price meaningfully different from the asset it tracks — a risk that has occurred in real, documented cases across different stablecoin designs.

Issuer and counterparty risk

A fiat-collateralized stablecoin's stability depends on the issuing company actually holding and properly managing sufficient reserves. This introduces a dependency on that company's solvency, honesty, and operational practices — a form of counterparty risk not present in holding a decentralized, non-custodial asset.

Other risks to be aware of

Regulatory risk: a stablecoin's legal treatment can change, potentially affecting its availability or redeemability.
Smart contract risk: for crypto-collateralized or algorithmic designs, a bug or exploit in the underlying contracts can threaten the peg.
Liquidity risk: being able to redeem or exchange a stablecoin at its intended value isn't always guaranteed, especially during periods of market stress.

Common mistake

"Stable" is not the same as "insured cash"

A stablecoin held in a crypto wallet or on an exchange does not carry the same guarantees as insured bank deposits in most jurisdictions. Treating it as fully equivalent to cash can understate real, documented risks.