Stablecoins are considered the steady layer of crypto. The type of stablecoin you use (i.e. centralised or decentralised) and who holds the underlying reserves will affect who controls the asset, what you're relying on and what risks you face. As of 2025, more than 90% of fiat-backed stablecoins were pegged to the US dollar, with centralised options such as Tether (USDT) and USD Coin (USDC) taking up roughly 93% of the entire stablecoin market's capitalisation. This underscores how much of the "stablecoin economy" relies on centralised infrastructure, even as other models remain available.

Below, we'll cover how centralisation works in stablecoins and what it means for confidence, custody, governance and risk.

What's in this article?

• Are stablecoins centralised?
  
• How does custody affect centralisation?
  
• What are the benefits of centralised models?
  
• How can businesses and other users evaluate centralisation risk?
  
• How Stripe can help
  

Are stablecoins centralised?

Fiat-backed stablecoins, such as USDC and USDT, are typically centralised by design. They're issued by companies that manage their reserves, oversee redemptions and retain the ability to block transactions.

Here's how stablecoin centralisation works:

• Single issuer: One organisation controls when new tokens are created or destroyed. Circle handles USDC this way, while Tether manages USDT.

• Off-chain reserves: The reserves backing the stablecoin are held by traditional financial institutions instead of the blockchain.

• Admin controls baked in: Many centralised stablecoins have smart contract functions that let the issuer freeze wallets or block transfers. For example, when the cryptocurrency mixer Tornado Cash was blacklisted in 2022 on suspicion of money laundering, Circle froze over $75,000 in USDC tied to Tornado Cash-linked addresses.

Stablecoins today tend to operate this way since it's efficient and regulation-friendly. But stability comes with trade-offs. Users are gaining predictability and liquidity, but giving up distributed control and relying on centralised belief.

Some alternatives, such as MakerDAO's Dai (DAI), use decentralised protocols and crypto collateral to reduce reliance on any one party. But even these can include centralised components in the infrastructure.

How does custody affect centralisation?

Custody answers a basic but critical question: who holds the assets backing the stablecoin? This determines how a stablecoin operates and how much confidence it requires.

Here are the two main types of custody and how they influence centralisation.

Centralised custody

Fiat-backed stablecoins typically rely on a company and its banking partners to hold reserves off-chain. USDC, for example, is backed by cash and Treasuries held by Circle's custodians. This setup is clean and familiar, which makes it a favoured option for fintechs, exchanges and corporate treasuries. But it also limits user controls and centralises risk: if the bank fails or cuts ties, access to reserves can be disrupted and if the issuer mismanages funds, then holders have no recourse beyond whatever legal framework exists. In situations where regulators intervene, the reserve assets can be frozen or redirected.

For example, in March 2023, part of USDC's reserves got stuck in Silicon Valley Bank after it collapsed, which caused USDC to dip below $1 and confidence to plummet. It took swift communication and eventual access to the funds to restore parity.

Decentralised custody

Collateral in decentralised stablecoins such as DAI lives on-chain and is managed by smart contracts rather than banks or middlemen. This means users hold their keys, and the protocol handles the rest.

While that improves transparency and censorship resistance, it introduces other risks, such as bugs in smart contracts, price volatility in the collateral and governance decisions that unexpectedly alter rules. But even DAI uses centralised components. For example, its Peg Stability Module (PSM) holds USDC as part of its reserves, so it's not entirely insulated from centralised custody risk.

What are the benefits of centralised models?

While crypto began as a deeply decentralised ecosystem, the increased popularity of stablecoins suggests a trend towards centralisation. Here are some reasons why:

• Ease of redemption: Companies, such as Circle, allow verified institutions to redeem USDC directly for dollars. That foundation makes it easy for exchanges and payment platforms to build on top of it.

• Price stability: With fiat reserves and redemption mechanisms, centralised coins tend to hold their peg more tightly than experimental or algorithmic alternatives. Arbitrage keeps the price close to $1, even under stress.

• Regulatory compliance: Centralised stablecoins can comply with Know Your Customer (KYC), Anti-Money Laundering (AML) and other requirements for enterprise use.

• Emergency responsiveness: If something breaks, a centralised team can fix it quickly. There's no Decentralised Autonomous Organisation (DAO) vote needed to freeze minting or patch a contract.

Centralisation also comes with drawbacks, such as conditional user control and issuer confidence. Make sure you consider the risks when choosing which model is right for you.

How can businesses and other users evaluate centralisation risk?

Not all stablecoins centralise power in the same ways. Some are transparent and well-structured, while others require a closer look. Whether you're assessing risk for your company's treasury management, an integration or personal use, here are some important questions to ask.

Who controls issuance and redemptions?

If a single company handles redemptions and supply, that's a clear point of centralisation. Check who has the authority to mint or burn tokens and under what conditions.

Where are the reserves held?

Determine whether the backing assets are on-chain or sitting in bank accounts. For example, USDC publishes monthly attestations, while DAI is backed by collateral that's visible on-chain. Any lack of transparency should raise flags.

Can assets be frozen?

Many centralised stablecoins include freeze functions. Look into whether the issuer can blacklist wallets, and whether they've done so in the past. It's a proxy for how much control they retain.

What's the governance model?

Find out if the project is governed by a DAO, a corporate entity or something in between. You need to know who decides what changes and how.

How has it held up under stress?

Look at historical depegs, regulatory actions, and how the team or community responded to them. That's where real decentralisation – or the lack of it – shows up.

How Stripe can help

Stripe Payments provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world. Businesses can accept stablecoin payments from almost anywhere in the world that settle as fiat in their Stripe balance.

Stripe Payments can help you:

• Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods, including stablecoins and crypto.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty and grow revenue.

• Improve payments performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments or get started today.