Digital currencies can be traced back to the end of 1980s in the form of DigiCash and e-gold. Later, cryptocurrency appeared towards the end of the first decade of the new millennium. Cryptocurrency is secured by cryptography. Cryptos are highly volatile.

As an attempt to make them less volatile, the concept of Stablecoins appeared. They are backed by underlying assets to limit price fluctuations and are more regulated. Several collaterals and methods stabilise them. These could be backed by commodity, fiat money, other cryptocurrency or any combination of these assets.

Digix Gold Tokens (DGX) are stablecoins which are commodity-based. Tether, Binance, Diem, USDT, USD and USD Coins are backed by fiat money. DAI is backed by cryptocurrencies. Seignoirage are stablecoins not backed by assets but by complex algorithms which control their supply.

Stabilisation makes digital currency a store of value as well as the medium of exchange.

Arth has been pegged to a basket of assets, where each asset is assigned weightage to hedge against inflation and currency risk. Arth can be treated as ‘value-stablecoin’.

The stability of stablecoins is related to the stability of underlying assets. The value may also relate to the trading volumes of such coins. These stablecoins too are subject to interest-rate risk, credit risk and liquidity-risk.