# What Are Stablecoins? USDT, USDC, and DAI Explained for Norwegian Investors
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Bitcoin can fall 20 percent in one week. Ether can halve in a month. For many, this volatility is what makes crypto exciting — but for just as many, it's precisely what keeps them away.
Stablecoins are the solution to this problem. They are cryptocurrencies designed to remain stable, usually pegged to one US dollar. You can send them worldwide in seconds, use them in DeFi protocols, park your wealth between trades — all without converting back to regular money and paying brokerage fees twice.
But "stable" does not mean "risk-free." The Terra/UST collapse in 2022 showed that a stablecoin can lose its entire value in under 72 hours. And today, the EU's new MiCA regulation creates uncertainty around the world's largest stablecoin, Tether (USDT).
This guide gives you the complete picture.
What is a stablecoin — the basic concept explained
Imagine you want to send 5,000 kroner to a friend in Mexico. Via the bank, it takes 3–5 business days and might cost 200 kroner in fees. With a stablecoin, you can send the equivalent amount in dollars — for example, 470 USDC — in under two minutes, for less than one krone in transaction fees on many networks.
A stablecoin is, therefore, a cryptocurrency with one extra feature: a mechanism that keeps its price fixed against a reference value. The most common reference value is 1 US dollar, but there are also euro-stablecoins (EURS), gold-stablecoins (PAXG), and experiments with NOK-pegged tokens.
The mechanism that keeps the price stable varies — and this is where the three major categories differ.
A stablecoin solves crypto's biggest paradox: the value of blockchain without the volatility that makes it unusable as a means of payment.
The three types of stablecoins
Fiat-backed: USDT and USDC
The simplest and most widely used type. For every USDT or USDC that exists, the issuer is supposed to hold one dollar (or equivalent) in reserve. You buy 1,000 USDC, Circle (the company behind USDC) puts 1,000 dollars in the bank or in government bonds. If you want to exit, you redeem your tokens for real dollars.
The strength is simplicity and stability. The weakness is centralization: you fully trust that the issuer actually has the money they claim to have — and that they won't be affected by regulation, bankruptcy, or freezing of bank accounts.
Crypto-backed: DAI and MakerDAO
DAI is issued by the decentralized protocol MakerDAO and does not rely on a centralized issuer with a bank account. Instead, users lock cryptocurrency (typically Ether or WBTC) as collateral in a smart contract and "mint" DAI against this collateral.
Because crypto is volatile, the protocol requires over-collateralization — you must lock 150 dollars in Ether to get 100 DAI. If the value of the collateral falls too much, the position is automatically liquidated.
The strength is that no single person or company controls DAI. The weakness is that the system is more complex and technical — and in an extreme crypto market crash, the collateral could fall faster than the protocol can react.
Algorithmic stablecoins: The dangerous category
Algorithmic stablecoins attempt to maintain the dollar peg without full reserve backing, instead using algorithms and token mechanisms. Terra/UST was the most famous example — and it ended in disaster. We'll delve deeper into this below.
USDT — Tether: Largest, most used, most controversial
Tether (USDT) was launched in 2014 and is today by far the largest stablecoin in the world — and actually the third largest crypto asset after Bitcoin and Ether by market capitalization. Over 110 billion USDT are in circulation as of 2024.
USDT is massively used as a trading pair on exchanges. Want to buy Solana on Binance without converting from dollars? You buy SOL/USDT. For market makers and traders, USDT is a universal medium of exchange.
The controversy surrounding Tether
For years, Tether refused to conduct independent audits of its reserves. In 2021, the company was fined 41 million dollars by the US regulatory authority CFTC for misleading the market about the composition of its reserves — including by counting unsecured loans to its sister company Bitfinex as "reserves."
Today, Tether publishes quarterly attestations from the auditing firm BDO Italia. These confirm that the reserves exist, but are not full audits according to international standards (IFRS/US GAAP). The reserves currently consist mainly of US Treasury bills, which is actually a solid composition.
USDT under MiCA
Here's where it's really important to pay attention. The EU's Markets in Crypto-Assets regulation (MiCA), which came into force for stablecoins in June 2024, requires issuers of stablecoins above a certain size (Electronic Money Tokens) to have a license in the EU. As of the time of publication, Tether has not applied for — or received — such a license. This has led several European exchanges, including Coinbase and Bitstamp, to delist USDT for European users. For Norwegian investors, this means that access to USDT may be reduced going forward.
USDC — Circle: The regulated challenger
USDC was launched in 2018 by Circle, a fintech company based in Boston. Circle is licensed as a money transmitter in the USA and is subject to strict regulation. USDC is in many respects the regulatory-compliant alternative to USDT.
Reserve structure and transparency
Circle publishes monthly reports attested by Grant Thornton (one of the world's major auditing firms). The reserves consist exclusively of cash in US banks and short-term US Treasury bills — no unsecured loans, no exposure to other crypto assets.
This was put to the test in March 2023 when Silicon Valley Bank (SVB) collapsed. Circle had 3.3 billion dollars of its reserves in SVB. USDC temporarily lost its dollar peg and fell to 0.87 dollars. Within 48 hours, the US government had guaranteed all deposits, and USDC returned to 1.00 dollar. The episode revealed real risk — but also that the USDC system was fundamentally sound.
USDC is preferred by institutional players and DeFi protocols such as Compound, Aave, and Uniswap. Circle has actively applied for a license under MiCA and is better positioned than Tether in the European market.
DAI and MakerDAO: Decentralized stability
MakerDAO was founded in 2015 and is one of the oldest and most successful DeFi protocols. DAI is the protocol's stablecoin — and it has never been controlled by a single company.
Here's how it works in practice: You have 1 Ether worth 3,000 dollars. You lock it as collateral in MakerDAO's Vault (a smart contract on Ethereum). You can now mint up to 2,000 DAI (at a 150 percent collateral ratio). DAI is now in your wallet, and you can use them freely. Your Ether is locked — you get it back when you repay the DAI plus a stability fee (interest set by MKR holders via governance).
If Ether's price falls below 3,000 dollars and your collateral ratio approaches 150 percent, other users ("keepers") can automatically liquidate your position to protect the system.
DAI has survived several crypto market crashes and is one of the most robust examples of decentralized finance in practice. But the system is technically demanding for new users.
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Terra/UST collapse 2022: What went wrong?
In May 2022, one of crypto history's most dramatic events occurred. UST — an algorithmic stablecoin linked to the Terra blockchain — collapsed from 1 dollar to almost zero in under three days. Around 40 billion dollars in market value evaporated.
The mechanism that failed
UST used an algorithm based on its sister asset LUNA to maintain the peg. In short: if UST traded below 1 dollar, you could burn 1 UST and mint 1 dollar worth of LUNA — and vice versa. Arbitrageurs were supposed to keep the system in balance.
The problem: the system only worked as long as people believed in it. When large players began to sell UST in a coordinated manner (possibly a deliberate attack), it created a "death spiral." UST fell → LUNA was minted to defend the peg → more LUNA pushed the price down → confidence completely collapsed → UST and LUNA became worthless.
What did we learn?
Three lessons dominate:
The Terra/UST collapse is crypto's equivalent of Lehman Brothers — a systemic shock that forced the entire industry to re-evaluate what "stable" truly means.
Stablecoins under MiCA: What does it mean for Norwegian users?
The EU's Markets in Crypto-Assets Regulation (MiCA) is the world's first comprehensive crypto regulatory framework, and Norway will implement it via the EEA agreement. For stablecoins, MiCA defines two categories:
EMT (Electronic Money Tokens): Stablecoins linked to a single fiat currency (like USDC/USD or EURS/EUR). The issuer must have an e-money license and hold all reserves in approved banks or government bonds. Daily transaction volume in the EU is limited to 200 million euros for non-euro EMTs (like dollar-stablecoins) — anything above this is in principle illegal to issue.
ART (Asset-Referenced Tokens): Stablecoins linked to a basket of currencies, commodities, or other assets. Stricter requirements, including capital buffer and approval from financial supervisory authorities.
USDT's uncertain future in the EU
This is one of the most important issues for Norwegian crypto investors right now. Tether currently does not meet MiCA requirements, and the company has not announced plans to apply for an EMT license. The consequence is that European regulated exchanges are delisting USDT. You can still buy USDT on unregulated exchanges, but serious players adhere to the regulations.
Norway is not an EU member, but MiCA will come via the EEA. Norwegian providers who wish to sell to EU customers, or who seek Norwegian licenses under similar regulations, will have to comply with these rules.
Norwegian and Nordic stablecoin projects
Norway and the Nordics are not absent from the stablecoin debate. Norges Bank has been investigating a Norwegian central bank digital currency (CBDC), often called e-krone, since 2020. This is not a stablecoin in the traditional sense — it is state-issued digital money — but it overlaps conceptually.
DNB and Norges Bank participated in a pilot project under the Financial Supervisory Authority in 2023 to explore tokenized assets on the blockchain. The results were cautiously positive, but much regulatory work remains.
In Sweden, companies like Monerium have launched euro- and SEK-denominated EMTs with e-money licenses — Monerium actually became the first company with a full EMT license under MiCA. This is an interesting path for Norwegian players to follow.
Currently, there is no Norwegian krone-stablecoin with significant liquidity and regulatory approval on the market. But the pressure from MiCA could accelerate this development.
Use cases: What do people use stablecoins for?
Trading: The most widespread use case. Traders hold USDT between positions to avoid volatility without exiting the crypto ecosystem. On Binance, USDT pairs represent over 60 percent of all trading.
Remittances and international transfers: Sending 1,000 dollars from Oslo to Lagos via USDC on Stellar costs less than 1 cent and takes under 5 seconds. Western Union typically charges 5–7 percent and takes 1–3 days.
DeFi yield: In DeFi protocols like Aave, Compound, or Curve, you can lend out stablecoins and earn interest — typically 3–8 percent APY in normal market conditions. This is significantly higher than Norwegian deposit rates, but with associated risks.
Saving in dollars: For residents in countries with high inflation (Argentina, Turkey, Nigeria), holding USDT instead of local currency is a direct financial survival strategy.
Risks you need to know
Depeg risk: Stablecoins can lose their dollar peg, like UST (permanently) and USDC during the SVB crisis (temporarily). Even USDT has briefly traded below 0.95 dollars during market panic.
Counterparty risk: Fiat-backed stablecoins rely on the issuer actually holding the reserves they claim. Tether's non-full audit practices are a real risk factor.
Smart contract risk: DAI and other on-chain stablecoins rely on the code being flawless. Vulnerabilities in smart contracts can lead to loss of funds.
Regulatory risk: USDT's MiCA problems are a good example. Regulatory interventions can freeze assets, force delistings, or make it impossible to redeem tokens.
Centralization risk: Circle and Tether can both blacklist specific wallet addresses — which they have done at the request of authorities. It's not Bitcoin.
How to buy and use stablecoins from Norway
Step 1: Choose an exchange. Firi, MiraiEx, and NBX are Norwegian exchanges. Internationally, Coinbase, Kraken, and Bitstamp are well-regulated alternatives that offer USDC. Always check that the exchange is registered with the Financial Supervisory Authority as a VASP (Virtual Asset Service Provider).
Step 2: Buy with Norwegian kroner. Most exchanges allow you to buy USDC directly with NOK via bank card or bank transfer. The exchange rate includes a spread — typically 0.5–1.5 percent.
Step 3: Choose a network. USDC exists on Ethereum, Solana, Arbitrum, Base, and many other networks. Ethereum is the safest and most widespread. Solana and Arbitrum have much lower transaction fees (under 1 cent vs. 1–10 dollars on Ethereum).
Step 4: Consider storage. For daily use, an exchange wallet is fine. For larger amounts — over 50,000 kroner — you should consider a self-custody wallet like MetaMask (software) or Ledger (hardware). Remember: not your private key, not your coins.
Step 5: Tax treatment. The Financial Supervisory Authority and the Tax Administration treat stablecoins as cryptocurrencies. Gains from realization (sale, exchange, use) are taxable as capital income (22 percent). You must also declare stablecoin holdings as assets on January 1 each year.
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Frequently asked questions
What is the difference between USDT and USDC?
Both are dollar-stablecoins, but they differ in transparency and regulation. USDC is issued by Circle, subject to strict US regulation, and has monthly audit attestations from Grant Thornton. USDT is issued by Tether, has been controversial regarding reserve backing, and currently lacks a MiCA license in the EU.
Are stablecoins safe to invest in?
They are more stable than Bitcoin or Ether, but not risk-free. Fiat-backed stablecoins have counterparty risk (relying on the issuer), crypto-backed have smart contract risk, and algorithmic ones can collapse quickly as Terra/UST showed. Diversify and never invest more than you can afford to lose.
Can I earn interest on stablecoins?
Yes. In DeFi protocols like Aave or Compound, you can earn 3–8 percent APY on USDC or DAI. Centralized platforms also offer deposit interest. Be aware of platform risk — Celsius and BlockFi went bankrupt in 2022 and froze customer funds.
What happens to USDT in Norway after MiCA?
Norway implements MiCA via the EEA agreement. Norwegian regulated exchanges will have to delist USDT if Tether does not obtain a MiCA license. You can still hold USDT in your own wallet, but the possibilities for buying and selling through Norwegian actors may become limited.
What is DAI and is it safer than USDT?
DAI is a decentralized stablecoin from MakerDAO, secured by crypto assets in smart contracts. It does not rely on a centralized company, but is more technically complex and exposed to smart contract risk. It is not "safer" — it has a different risk profile.
What is a "depeg" and is it dangerous?
A depeg means that the stablecoin loses its peg to the reference value — for example, 1 USDC trading at 0.87 dollars. For fiat-backed stablecoins, this is usually temporary. For algorithmic stablecoins, it can be permanent and catastrophic, as we saw with UST.
Do I pay tax on stablecoins in Norway?
Yes. The Tax Administration treats stablecoins as assets on par with other crypto. Gains from realization (sale, exchange, use) are taxable as capital income (22 percent). You must also declare stablecoin holdings as assets on January 1 each year.
Can stablecoins be used to send money abroad?
Absolutely — and it is one of the most valuable use cases. Sending USDC from Norway to, for example, Poland, the Philippines, or Kenya costs fractions of traditional bank transfers and is much faster. The recipient needs a crypto wallet and access to a local exchange.
What is the difference between a stablecoin and a Norwegian digital krone (CBDC)?
A CBDC (Central Bank Digital Currency) is issued and guaranteed by the central bank — in Norway's case, Norges Bank. It is state-issued digital money. A stablecoin is issued by a private company (USDC, USDT) or a protocol (DAI) and has no state guarantee. CBDCs are under investigation — none have been launched in the Nordics as of 2024.
What is the largest stablecoin in the world?
Tether (USDT) with over 110 billion dollars in market capitalization as of 2024. It is the third largest crypto asset overall, after Bitcoin and Ether, and dominates trading volume on global crypto exchanges.
