If you’ve been paying attention to cryptocurrency but haven’t taken the plunge, stablecoins might be the entry point you’ve been waiting for. Unlike Bitcoin or Ethereum, which can swing 10% in a day, stablecoins are designed to maintain a steady value—typically one US dollar. For Canadian savers frustrated by low interest rates and looking for alternatives to traditional banking, they offer an intriguing middle ground between the crypto world and conventional finance.
But are stablecoins actually better than keeping your money in a savings account or GIC? The answer, as with most financial questions, is more nuanced than a simple yes or no.
What Exactly Are Stablecoins?
A stablecoin is a type of cryptocurrency designed to maintain a stable value, usually pegged to a fiat currency like the US dollar. The two largest stablecoins by market capitalization are Tether (USDT) and USD Coin (USDC), both of which aim to be worth exactly one US dollar at all times.
The mechanism is straightforward in theory: for every stablecoin in circulation, the issuing company holds equivalent assets in reserve—cash, Treasury bills, or other highly liquid investments. When you buy USDC, Circle (the company behind it) is supposed to have one US dollar sitting in a bank account or short-term Treasury security backing your token. When you want to redeem it, you get your dollar back.
This backing is what distinguishes fiat-backed stablecoins from algorithmic stablecoins, which tried to maintain their peg through complex mechanisms involving other cryptocurrencies. The collapse of Terra/UST in 2022, which wiped out billions of dollars, demonstrated why that approach can fail catastrophically. Today, the stablecoin market is dominated by fiat-backed options, which have proven more resilient.
For practical purposes, you can think of stablecoins as digital dollars that live on a blockchain. They can be sent anywhere in the world in minutes, traded 24/7, and used in various cryptocurrency applications—all while maintaining that stable one-dollar value.
USDT vs USDC: The Two Giants
While dozens of stablecoins exist, USDT and USDC account for the vast majority of the market. Understanding the differences between them helps you make an informed choice.
Tether (USDT) is the older and larger of the two, launched in 2014. It’s the most widely traded stablecoin, available on virtually every cryptocurrency exchange and used extensively in Asia and Latin America for cross-border payments. USDT’s ubiquity means deep liquidity—you can buy and sell large amounts without significantly affecting the price. However, Tether has faced persistent questions about its reserves. The company provides quarterly attestations rather than full audits, and its reserve composition has historically included commercial paper and other assets beyond cash and Treasuries.
USD Coin (USDC), launched in 2018 by Circle (in partnership with Coinbase), has positioned itself as the more transparent alternative. Circle provides monthly attestations from a major accounting firm, holds reserves primarily in cash and short-term US Treasuries, and has obtained regulatory licences in multiple jurisdictions. In June 2025, Circle went public on the New York Stock Exchange, further increasing its accountability to public markets. USDC is particularly popular among institutional investors and in decentralized finance (DeFi) applications.
For most Canadian savers, either stablecoin will function similarly for basic purposes. USDC’s transparency edge makes it the more conservative choice, while USDT’s deeper liquidity might matter if you’re trading actively.
The Yield Opportunity
Here’s where stablecoins become interesting for savers: you can earn interest on them.
Unlike a traditional savings account where the bank pays you interest for the privilege of lending out your deposits, stablecoin yields come from various sources in the cryptocurrency ecosystem. Some platforms lend your stablecoins to traders who need liquidity. Others deploy them in decentralized finance protocols where borrowers pay interest. The rates vary depending on market conditions, platform risk, and how your funds are being used.
As of early 2026, yields on stablecoins range quite broadly. Conservative centralized platforms might offer 4% to 8% annually, while DeFi protocols can offer anywhere from 3% to 12% depending on the specific opportunity. During periods of high borrowing demand, rates can spike higher—though they can also compress when demand falls.
Compare this to Canadian GIC rates, which currently top out around 3.5% to 4% for the best one-year terms. High-interest savings accounts from online banks might offer 2.5% to 3%. The gap between traditional banking and stablecoin yields has narrowed considerably since 2022 (when the Bank of Canada was still raising rates), but stablecoins often still offer a premium—particularly on platforms willing to take more risk.
The Risks You Need to Understand
That yield premium exists for a reason: stablecoins carry risks that GICs and insured savings accounts do not.
The most fundamental risk is that the stablecoin itself could fail to maintain its peg. While USDT and USDC have both maintained their dollar value remarkably well over the years, there have been brief deviations. In March 2023, USDC temporarily dropped to around $0.87 when it was revealed that Circle held reserves at Silicon Valley Bank during that bank’s collapse. The peg recovered within days as Circle confirmed its reserves were safe, but the episode demonstrated that even well-managed stablecoins aren’t immune to shocks.
If you’re earning yield through a centralized platform, you’re also taking counterparty risk—the risk that the platform itself could fail, freeze withdrawals, or mismanage funds. The crypto industry has seen several high-profile collapses, including Celsius and Voyager in 2022, where customers lost access to funds they thought were safe. Platform selection matters enormously.
DeFi protocols offer an alternative that removes the platform counterparty, but they introduce smart contract risk instead. These protocols operate through code that’s been audited but could still contain vulnerabilities. Hacks and exploits, while less common on established protocols like Aave, do occur.
There’s also regulatory risk. Stablecoin regulation is evolving rapidly worldwide. The US passed the GENIUS Act in 2025, establishing a framework for stablecoin issuers, but requirements continue to develop. Canada has been relatively accommodating of cryptocurrency, but regulations could change in ways that affect how you hold or use stablecoins.
Finally, there’s the practical matter of complexity. Using stablecoins requires understanding cryptocurrency wallets, managing private keys or trusting a custodian, and navigating platforms that are less intuitive than your bank’s website. For some people, this learning curve is a significant barrier.
What About Insurance?
When you deposit money in a Canadian bank or credit union, the Canada Deposit Insurance Corporation (CDIC) protects your deposits up to $100,000 per category. If the bank fails, you get your money back.
Stablecoins have no equivalent protection. If Tether or Circle were to become insolvent and their reserves proved insufficient, you could lose everything. If the platform where you’re earning yield collapses, your funds might be tied up in bankruptcy proceedings for years—or lost entirely.
Some argue that well-reserved stablecoins are actually safer than bank deposits because they’re backed by US Treasuries rather than loans that could default. There’s some logic to this, but it ignores the operational and legal protections that make banking work. CDIC insurance isn’t just about the assets backing your deposit; it’s about having a government-backed guarantee that makes you whole regardless of what happens to the institution.
This lack of insurance is the single biggest reason why stablecoins shouldn’t replace your emergency fund or money you can’t afford to lose. They might be a reasonable place for funds you’re willing to put at some risk in exchange for potentially higher returns, but that’s a very different proposition than a savings account.
Tax Considerations for Canadians
The CRA treats cryptocurrency as a commodity, which has implications for stablecoin users.
When you convert Canadian dollars to USDC, you’re technically acquiring a commodity. If you later sell that USDC for more CAD than you paid—perhaps because the Canadian dollar weakened against the US dollar—you have a capital gain. The reverse is also true: if the loonie strengthens and your USDC is worth fewer Canadian dollars when you sell, you have a capital loss.
Interest or yield earned on stablecoins is generally taxable as income in the year you receive it, similar to interest from a savings account. This is true even if you don’t convert the earnings back to Canadian dollars.
The record-keeping requirements are more demanding than traditional banking. You need to track your cost basis, the fair market value of any yield you receive, and any trades or conversions you make. Tax software designed for cryptocurrency can help, but it’s more work than receiving a T5 from your bank.
A Practical Framework
Given both the opportunities and risks, how should Canadian savers think about stablecoins?
For your emergency fund and money you absolutely need to be safe, traditional banking remains the sensible choice. CDIC insurance, instant access, and regulatory protection are worth the lower interest rates for funds that serve as your financial safety net.
For savings beyond your emergency fund—money you’re putting aside for medium-term goals or that you’d otherwise invest—stablecoins become worth considering. The yield premium over GICs can be meaningful over time, and the 24/7 liquidity is genuinely useful. Just size your allocation according to how much risk you’re comfortable taking.
For people who are already active in cryptocurrency, stablecoins serve as a useful place to park funds between trades or during market uncertainty. They let you stay in the crypto ecosystem without exposure to price volatility.
Regardless of your situation, platform selection is critical. Stick with established, regulated platforms. Avoid anything promising yields that seem too good to be true—they usually are. And never put funds into stablecoins that you couldn’t afford to lose entirely, however unlikely that outcome might seem.
Getting Started
If you’re curious about stablecoins after reading this, the simplest path is to purchase some through a Canadian cryptocurrency exchange that supports USDC or USDT. You can buy a small amount—$100 or less—just to understand how the process works before committing more.
For those interested in earning yield, research platforms carefully. Understand exactly how your funds will be used and what risks you’re taking. Start small, and only increase your allocation as you become more comfortable with the technology and the risks involved.
CryptoExperts can help you understand whether stablecoins make sense for your situation. Our consultation service provides guidance tailored to your goals, helping you navigate both the opportunities and the risks of this evolving space.
Disclaimer: This article is for educational purposes only and does not constitute financial, investment, or tax advice. Stablecoins carry risks including loss of principal. The yields mentioned are illustrative and can change significantly based on market conditions. Consult a qualified financial advisor and tax professional before making decisions about your savings.
Leave a Reply