What Are Stablecoins? Tether and Circle Owed $257 Billion

A stablecoin is a digital token that its issuer promises to swap for one US dollar. The issuer is the company that creates the token and swaps it back. Tether issues a token called USDT. Circle issues one called USDC. On 30 September 2026, the two companies owed holders about $257 billion between them.

This guide explains what backs that promise, who checks it, and what happens if it fails. We wrote it on 8 November 2026.

Bitcoin, a digital coin, and ether, the coin of the Ethereum network, rise and fall with demand. Our guide to Bitcoin, Ethereum, and Solana compares them. A stablecoin aims to stay at exactly one dollar. That aim is called a peg.

A blockchain is a shared public record of transactions that many computers copy and check. A token is a digital entry on that record.

Nothing in the token holds the price at one dollar. The price holds because the issuer promises to swap each token for a dollar. The issuer keeps reserves, which are the assets it owns against the tokens it has issued. The tokens in circulation are the tokens holders could hand back, so that total is what the issuer owes.

The test is whether the issuer owns at least as much as it owes. Tether's report for 30 September 2026 shows $191.5 billion owned against $183.5 billion owed. That is $1.04 of assets for each $1.00 owed.

Chart 1 sorts those assets. Treasury bills are loans to the US government that repay within months. A repurchase agreement is a loan of cash, backed by Treasury bills as collateral, that repays on a set date. A secured loan is backed by collateral worth more than the loan.

Treasury bills were $122.8 billion, or 64.2% of Tether's assets. Repurchase agreements were $16.7 billion (8.7%). Gold was $19.1 billion (10.0%), secured loans $14.2 billion (7.4%), and Bitcoin $8.4 billion (4.4%).

The other 5.4% was other investments ($6.0 billion), public equities (shares listed on stock markets, $4.2 billion), and $0.1 billion of company bonds, non-US Treasury bills, and cash. Shares are rounded.

Circle's report for the same date shows $74.0 billion owned against $73.9 billion owed, which is $1.001 per token.

Circle held $36.7 billion in repurchase agreements that repay the next day (49.6%), $27.1 billion in Treasury bills (36.7%), and $10.2 billion in cash (13.8%). Cash is shown after small adjustments for payments not yet settled.

Most of these assets, $62.5 billion or 84.5%, sat in the Circle Reserve Fund. BlackRock, an asset manager, runs that fund. It holds only cash, US Treasury debt that repays soon, and repurchase agreements that repay the next day.

The table compares the two issuers on the same date.

Tokens in circulation for Tether is the liability for tokens issued in its report. Source: Tether Financial Figures and Reserves Report and fees page; Circle USDC Reserve Report and website; YX Insights

Tether has the larger cushion.

An audit tests a company's complete accounts for a year and says whether they are fairly presented. An attestation is narrower. An accounting firm tests one statement the company makes, as of a set date.

Circle's report is an attestation. An accounting firm tested the company's claim that its reserve assets equalled or exceeded the USDC in circulation on two dates in September 2026. It found the claim fairly stated, with no significant errors.

Tether's report is an assurance report, a type of attestation. BDO, an accounting firm, found the reserves report fairly presented as at 30 September, with no significant errors. BDO did no work at any other date.

The reports are dated 26 days (Circle) and 30 days (Tether) after the date they cover.

Redeeming means handing tokens back to the issuer for dollars.

Tether's fees page sets a minimum of $100,000 and a fee of the greater of $1,000 or 0.1%.

Circle's website says Circle Mint, its service for large customers, lets exchanges, banks, and other large institutions redeem USDC one to one. An exchange is a marketplace where people buy and sell crypto. Holders without direct access sell on an exchange or app at the market price.

That price is where the peg is tested. A token that trades below one dollar can be bought cheaply and swapped for a full dollar by anyone allowed to redeem. That buying pushes the price up. This works only while redemptions run.

In March 2023, Circle could not reach $3.3 billion of reserves, about 8% of the total, held at Silicon Valley Bank, a US bank that failed. A Federal Reserve staff note says USDC fell to 86 cents while redemptions were shut.

Yes. Both issuers can block specific tokens so their holders cannot move them. Circle's 30 September report counts $131.2 million of USDC as "access denied", which means blocked to comply with a law, regulation, or legal order.

On 20 November 2023, Tether announced it had frozen about $225 million of USDT linked to a human-trafficking syndicate.

Once the GENIUS Act takes effect, issuers must be able to freeze tokens and obey any lawful order from a court or federal agency.

The Guiding and Establishing National Innovation for U.S. Stablecoins Act, called the GENIUS Act, became law on 18 July 2025. Its rules do not apply yet. They start on the earlier of 18 January 2027 or 120 days after the main federal regulators issue final rules.

On 21 October 2026, the Office of the Comptroller of the Currency, which supervises national banks, issued its final rule. It said the Act takes effect on 18 January 2027.

Once in force, the Act will require reserves of at least one dollar for each token. Permitted reserves include US cash, money at the US central bank, and deposits at insured banks. They also include Treasury debt with 93 days or less to run and repurchase agreements that repay the next day.

The list leaves out gold, Bitcoin, and loans, among other assets. Those three made up about 22% of Tether's assets on 30 September 2026.

Issuers will have to publish their reserve mix every month. An accounting firm must examine it. Executives must certify it, with criminal penalties for knowingly false reports.

If an issuer goes bust, token holders will be paid from the reserves before other creditors.

Once in force, the GENIUS Act will bar issuers from paying holders interest, which is money paid solely for holding a token. It does not cover exchanges.

A crypto market-rules bill before the Senate would bar exchanges from paying interest for holding, while allowing rewards tied to activity. On 15 September 2026, the Senate voted 49 to 50 against ending debate on taking up that bill, below the three-fifths needed. Congress.gov listed no later action on 8 November 2026.

A stablecoin is a company's promise. Four questions test it: what backs it, who checked it and when, who can redeem it, and whether the issuer can freeze it.

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No stablecoin is guaranteed by the US government in any form. In March 2023, USDC fell to 86 cents while the issuer's redemptions were shut. Each token's safety rests on its reserves, on who checks them, and on whether redemptions keep running.

Tether's USDT holds more of its reserves outside Treasury bills than Circle's USDC. It also has 2.5 times as many tokens in circulation. On 30 September 2026, Circle held all its reserves in Treasury bills, repurchase agreements, and cash. Tether held 72.9% in Treasury bills, repurchase agreements, and cash, with gold, loans, and Bitcoin among the rest.

Exchanges and apps sell stablecoins at the market price. Dealing directly with the issuer needs an approved account. Tether sets a $100,000 minimum, while Circle Mint serves institutions only. The price on the exchange can sit slightly above or below one dollar.

It takes effect on the earlier of 18 January 2027 or 120 days after the main federal regulators issue final rules. The Office of the Comptroller of the Currency said on 21 October 2026 that the Act takes effect on 18 January 2027. A separate restriction on platforms offering stablecoins from unapproved issuers starts on 18 July 2028.

DISCLAIMER: This article is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.