[Glossary](https://pecuvo.eu/en/glossary/) · Money and currencies # Stablecoin **In short:** A stablecoin is a crypto token that promises a stable value against a currency (for example €1) or against assets; how stable it is depends on what backs it and who holds the backing. **Simply put:** Some are backed by money, some by other assets, and some are "algorithmic" — no reserve, just a formula. In the EU, MiCA distinguishes e-money tokens (issued only by banks and e-money institutions; holders can redeem them at par at any time and free of charge) from asset-referenced tokens (with a separate reserve protected if the issuer fails). Paying interest to holders is banned for both. **Example:** You hold 500 tokens "1 token = €1". With an e-money token under MiCA you can ask the issuer for €500. An "algorithmic" stablecoin gives no such right — TerraUSD lost its link to the dollar in May 2022. **Watch out:** "Backed by an algorithm" is not backed. Ask what backs it, who holds it and what happens if the issuer fails. **Source:** Regulation (EU) 2023/1114 (MiCA), arts. 36, 40, 48–50 — https://eur-lex.europa.eu/eli/reg/2023/1114/oj ## In depth in the modules - [Module 5](https://pecuvo.eu/en/modules/crypto-and-tokenisation/) - [Module 3](https://pecuvo.eu/en/modules/assets-and-cash-equivalents/) - [Module 1](https://pecuvo.eu/en/modules/history-of-money/) ## Related terms - [Cryptocurrency](https://pecuvo.eu/en/glossary/cryptocurrency/) - [Blockchain](https://pecuvo.eu/en/glossary/blockchain/) - [Digital euro](https://pecuvo.eu/en/glossary/digital-euro/) - [Deposit guarantee](https://pecuvo.eu/en/glossary/deposit-guarantee/) - [Crypto scam](https://pecuvo.eu/en/glossary/crypto-scam/)