What is a Stablecoin?
A stablecoin is a cryptocurrency designed to maintain a stable value relative to a reference asset — typically the US dollar — through various mechanisms including fiat reserves, algorithmic controls, or over-collateralization.
WHY IT MATTERS
Volatility is the fundamental problem with using cryptocurrency for payments. If an agent pays 100 USDC today and it's still worth $100 tomorrow, that's predictable. If it pays in ETH and the price drops 20% overnight, the economics break.
Stablecoins solve this by pegging their value to fiat currencies. USDC and USDT are reserve-backed — each token is redeemable for one dollar from reserves. DAI is crypto-collateralized — backed by over-collateralized crypto positions. Algorithmic stablecoins use supply/demand mechanisms (with mixed results — see UST collapse).
For AI agents, stablecoins are the default payment currency. x402 uses USDC. Agent-to-agent payments are denominated in stablecoins. This makes spending limits, budgets, and financial controls straightforward — everything is denominated in familiar dollar terms.
HOW POLICYLAYER USES THIS
Stablecoins are the primary currency for agent payments controlled by PolicyLayer. Spending limits, budgets, and transaction policies are all denominated in stablecoin terms — giving operators dollar-denominated control over agent spending.