Stablecoin definition

Stablecoins matter here because they solve the problem that made virtual currency impractical for commercial settlement: volatility. A trade obligation denominated in dollars can be settled in a dollar-referenced token without either party taking price risk.

Whether such a transfer is screened depends entirely on where it touches a regulated service. Issuers of the major fiat-referenced tokens can and do freeze addresses at the request of authorities, which makes the choice of token itself a meaningful signal.

Where this term is used

How is cryptocurrency used to evade sanctions? — Settling obligations in virtual assets so that value moves without a correspondent bank, a payment message or a screening system in the path, and without any institution able to block it in transit.
What are mixers and chain hopping? — Breaking the traceability of on-chain funds by pooling them with other users' funds, or by moving them between blockchains, so that outputs cannot be readily linked to their inputs.
What is stablecoin settlement and why does it matter for sanctions? — Settling commercial obligations in a fiat-referenced token, so that a dollar-denominated trade can be paid without a dollar ever passing through a correspondent bank.

Related terms

Virtual asset service provider — A business that exchanges, transfers, safekeeps or administers virtual assets for others, and which FATF expects to be licensed and supervised like other financial institutions.
Chain hopping — Moving value rapidly between different blockchains, usually through bridges or swap services, to interrupt tracing that works within a single chain.
Mixer — A service that pools virtual currency from many users and redistributes it, so that outputs cannot be readily linked to the inputs that funded them.

Where this term is used

Related terms

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