A stablecoin is issued when a company takes in dollars or other assets and creates new coins backed by them. It is redeemed when someone hands the coins back for those assets, which the issuer then destroys. Coins are minted as demand rises and burned as it falls.
Here is the logic behind it. Each coin is meant to be a claim on about a dollar of reserves, so the number of coins in the world tracks the money held behind them. Because a big holder can always create coins at a dollar and redeem them for a dollar with the issuer, that fixed swap is the anchor that keeps the market price near a dollar. If the idea is new to you, start with what a stablecoin is.
Most people never mint or redeem a coin themselves, though. They buy and sell on an exchange, and the gap between those two doors is what this guide walks through. A quick glossary of lifecycle terms explains any word that is new.
Issuing (minting) a new stablecoin
Issuing a stablecoin means minting new coins against an inbound deposit. A large customer sends dollars or approved assets to the issuer, the issuer holds them in reserve, and it creates an equal number of new coins on a blockchain. This happens in the primary market, and the supply grows only when real money comes in.
Picture a warehouse that takes in your goods and hands you a receipt for them. The receipt is not the goods, but you trust it because you can bring it back and collect the goods any time. Minting a stablecoin works the same way. You deposit dollars, and you get coins, which are the receipts. The reserves are the goods sitting in the warehouse, and the promise that you can swap the receipt back is what gives each coin its value.
The people who deposit and mint are usually big, vetted firms, not individuals. When one of them wants new coins, it sends the asset to a designated party, and once the money lands the issuer creates and hands over an equal amount of coins (source: Federal Reserve note on how stablecoins work). The issuer is expected to hold reserves worth as much as every coin it has minted. In the United States, the GENIUS Act became law in 2025, though its rules are not in force yet. Once it takes effect, it will require payment-stablecoin issuers to fully back their coins with safe assets and report on those reserves (source: GENIUS Act, Public Law 119-27).
How the minting actually happens depends on the type of coin. A cash-backed coin is minted against dollars and short-term government debt held by a company. A crypto-backed coin is minted against other crypto locked in a smart contract, with extra collateral as a cushion. An algorithmic coin mints and burns by a rule rather than against a deposit, which is part of why that design is fragile. The full picture of how each stablecoin type is backed is its own topic. The mint itself is recorded on a public network, so stablecoins on Ethereum is a good next step for seeing where the coins actually live.
Redeeming a stablecoin: the two doors out
Redeeming means swapping a coin back for the asset behind it. There are two doors. The first is primary redemption, done directly with the issuer for a dollar of reserves. The second is a secondary exit, selling the coin on an exchange to another user at whatever the market price is that moment.
The first door is the one the word "redeem" really describes. You hand your coins to the issuer, the issuer destroys them, and it sends you the reserve asset, usually a dollar per coin. This is the swap-back right that the Bank of England puts at the center of how a stablecoin works: whoever issues the coin holds the same value in real money, and the holder has the right to swap it back whenever they want (source: Bank of England stablecoin explainer). In practice, though, fiat-backed issuers mint and burn only with big institutional customers, so most people never use this door (source: Federal Reserve note on primary and secondary stablecoin markets).
The second door is the one almost everyone actually uses. Instead of going to the issuer, you sell your coins on an exchange to another buyer, and you get whatever the order book pays that second. How smoothly that goes depends on market depth on an exchange, which is just how many buyers and sellers are standing ready. Since most people already keep their coins on a trading platform, the exchange is where most users hold their coins and where they cash out.
| Question | Primary redemption | Secondary exit |
|---|---|---|
| Who can use it | Vetted institutions with an issuer account | Anyone with an exchange account |
| How it works | Hand coins to the issuer; they burn them and pay reserves | Sell coins to another user on the order book |
| Price you get | A fixed dollar per coin | The market price that moment, near a dollar |
| Speed | Hours to a few days | Seconds to minutes |
| Main friction | Identity checks, minimums, fees, geography | Trading fees and the spread |
The deeper, side-by-side comparison of primary redemption versus a secondary sale is a topic of its own. What matters here is that the first door has a gatekeeper, which is the next thing to understand.
Primary redemption is an institutional door
In practice, primary redemption is for institutions, not individuals. Opening an account with an issuer means passing business checks, meeting a minimum size, paying fees, and living in a supported country. So a regular holder with a few hundred dollars almost never redeems with the issuer. They sell on an exchange instead.
Take the two biggest coins. Circle Mint, the account for creating and cashing out USDC directly, is open to institutions only, not to individuals, and it takes a business review that can run for weeks before you can use it (source: Circle Mint). Tether goes further for USDT: direct redemption needs a verified account, a minimum of 100,000 dollars per redemption, and a fee of the greater of $1,000 or 0.1% of the amount (source: Tether redemption fees). Both doors sit behind the same issuer KYC checks you would meet at a bank.
Put real numbers on it and the split is obvious. A payments company redeeming $10 million happily uses the issuer door, since the fee is tiny next to the amount and it wants dollars in its bank account. A retail holder with $500 cannot meet a $100,000 minimum and would never pay a $1,000 fee, so that door is simply shut to them. Selling on an exchange takes seconds and costs a few cents, which is why the secondary market is where almost all real exit happens.
In our experience at BloFin, most users never touch primary redemption. They move in and out of USDT and USDC on the secondary market, the exchange order book, in seconds, while primary mint and redeem with the issuer stays an institutional process wrapped in minimums and identity checks. That is why the price you get is the market price at that moment, not a dollar handed to you by the issuer. The deeper question of when redemption can slow or fail is its own topic.
Follow one coin through the full lifecycle loop
The lifecycle is a loop: dollars go in, coins are minted, the coins circulate and change hands, then someone redeems them and the coins are burned. Supply expands when demand rises and contracts when holders cash out. Follow a single batch of coins and the whole loop becomes easy to picture.
Say a payments company wires $10 million to a stablecoin issuer. The issuer holds that $10 million in reserve and mints 10 million new coins into the company's wallet, so the total supply just rose by 10 million. The company then spends the coins into the world. People trade them, send and receive crypto with them across networks, and park them in a crypto wallet. Through all of that movement, the reserves sit untouched behind them.
Later, a big holder gathers up 10 million of those coins and hands them back to the issuer. The issuer pays out $10 million from reserves and burns the 10 million coins for good. Supply falls by 10 million, right back to where it started, and the reserve account shrinks by the same amount, so the backing ratio never changes. The same steps run every day, in both directions at once:
- Deposit: a customer sends dollars or assets to the issuer.
- Mint: the issuer holds the deposit in reserve and creates an equal number of new coins.
- Circulate: the coins move between wallets, exchanges, and apps.
- Redeem: a holder returns coins to the issuer for the reserve asset.
- Burn: the returned coins are destroyed, and supply falls.
Scale that up across every issuer and you get the total stablecoin supply, which sat above $300 billion in mid-2026 and rises and falls as coins are minted and redeemed (source: DefiLlama stablecoin data). Because every mint and burn is written to a public network, anyone can watch that supply move in near real time, which makes a stablecoin's float easier to track than money sitting inside a bank. The number is not fixed. It rises and falls with demand.
Minting and redemption hold the price near a dollar
Minting and redeeming hold the peg through arbitrage. Because a big trader can always create a coin for a dollar and redeem one for a dollar, any gap between that dollar and the exchange price is free profit. Chasing that profit means buying or selling until the market price is pulled back to a dollar.
Watch it work on the cheap side. Say a coin slips to $0.99 on an exchange. A trader with an issuer account can buy coins at 99 cents, redeem them for a full dollar each, and pocket the penny. All that buying lifts the exchange price back toward a dollar. Now the expensive side. Say the coin trades at $1.01. The same trader mints new coins at a dollar, sells them on the exchange for $1.01, and again pockets the penny, and the extra selling pushes the price back down. The fixed dollar at the issuer's door is what the whole market prices against, and that primary redemption value is what pulls the trading price back toward a dollar (source: University of Chicago working paper on stablecoin arbitrage).
There is an honest limit to this. It only works while primary redemption is open and the reserves are truly there. And because only large institutions can reach the issuer's door, and they pay fees and meet minimums, they only step in when the gap is big enough to be worth it. Small deviations can linger for a while before anyone bothers. That is why a healthy coin sits near a dollar rather than exactly on it. In calm markets that gap is tiny, a fraction of a cent, which is why a big coin usually reads as a flat dollar on a screen, and the gap only widens when people start to doubt the door will open.
Interruptions that can stall the lifecycle
The loop can stall or break. Redemptions can be paused, the issuer's bank can be shut for a weekend, the reserves can be hard to sell quickly, or a court or sanctions order can freeze coins. None are everyday events for the big coins, but each one can knock the price off a dollar until the loop restarts.
The clearest example was a banking problem, not a crypto one. In March 2023, Circle had about $3.3 billion of USDC reserves, roughly 8% of the total, sitting at Silicon Valley Bank when the bank failed on a Friday. Banks were closed for the weekend, so Circle could not move the money or process redemptions, and USDC slid to about $0.86 before recovering once the US government guaranteed all of the bank's depositors that Sunday (source: Federal Reserve note on Silicon Valley Bank and stablecoins). The coin was fully backed the whole time. The problem was access, not the amount, which is really a question of settlement and custody and where the cash can move.
There is also a legal side. Big fiat-backed issuers can freeze specific coins in response to a court order or sanctions, which is exactly the kind of power explored in a legal scenario over freezing USDT. When any of these interruptions hit, the effect on you is not abstract. In our experience at BloFin, the first thing a retail holder sees is not a failed issuer redemption they would never file, but the secondary price moving off a dollar on the order book, which is the signal most people actually trade on. The full set of reasons redemption can fail or slow, and what to do about them, is a topic of its own: stablecoin redemption risk.
Frequently asked questions
What is the difference between minting a stablecoin and buying one?
Minting means new coins are created against a fresh deposit with the issuer, in the primary market, and it is mostly done by large firms. Buying means getting coins that already exist from another holder on an exchange, in the secondary market, which is what nearly everyone does. Minting adds to the total supply. Buying just moves existing coins from one owner to another, and it leaves the supply unchanged.
Is minting a stablecoin the same as a central bank printing money?
No. A central bank can add money to the system without setting aside a matching asset for each unit. A fiat-backed stablecoin works the opposite way. A new coin appears only after a customer first sends an equal amount of dollars or approved assets, which the issuer holds in reserve. So the coin supply cannot grow unless real money comes in first, and it shrinks the moment coins are redeemed. The creation is backed one for one, not issued at will.
Who are the authorized participants that mint and redeem directly?
They are vetted firms with a direct account at the issuer, such as crypto exchanges, payment companies, fintechs, and institutional trading desks. They pass the issuer's business and identity checks first. These firms act as the bridge between the issuer and everyone else, minting coins when demand rises and redeeming them when it falls. For everyone else, these firms are the only practical route to the issuer's door, which is why an ordinary holder reaches primary mint and redemption only indirectly, through the coins these participants put into circulation.
Do all stablecoins redeem the same way?
No. The path depends on the design. A fiat-backed coin like USDC or USDT is redeemed with the company that issued it, which pays out reserves and burns the coins. A crypto-backed coin is redeemed by returning it to a smart contract, which then releases the collateral locked behind it. An algorithmic coin has no reserve pool to claim against, so it has no real redemption door, which is a big part of why that design is fragile. Knowing which door your coin even has tells you how you would actually get your money out.
Does it cost anything to mint a stablecoin?
It depends on the issuer, and it is separate from any redemption fee. Some issuers let approved institutions create coins at little or no cost, then apply their charges on the way out. Because minting is open only to vetted firms, an everyday user never pays a minting fee at all. If you buy on an exchange, your cost is the trading fee and the spread, not a fee to create coins, because you are getting coins that already exist rather than making new ones.
Do stablecoins expire?
No. A stablecoin has no maturity date the way a bond does. It stays on the blockchain and keeps its value as long as the issuer holds the reserves behind it. A coin can change hands for years and only leaves existence when someone returns it to the issuer and the issuer burns it. Its life is defined by redemption, not by a clock, so a coin sitting in your wallet does not need to be renewed or rolled over.
Researched and written by the BloFin Academy editorial team with AI-assisted drafting. Updated July 2026. Primary sources: the US Federal Reserve, the Bank of England, Circle, Tether, the GENIUS Act (Public Law 119-27), and DefiLlama. All facts independently verified against cited sources current as of July 2026.
This article is educational and general in nature, not financial, investment, tax, or legal advice. Stablecoins carry real risks, including the risk of losing their peg, delayed or frozen redemptions, and issuer failure, and their value is not guaranteed. Nothing here is a recommendation to buy, sell, or hold any specific asset. Do your own research, and consider a licensed professional before making financial decisions. BloFin does not provide investment advice.