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1. What fiat money is
Fiat money is the currency people use every day: the Argentine peso, the Brazilian real, the Colombian peso, the Mexican peso. Its value does not depend on a reserve of gold or any other physical asset sitting behind each bill. It depends on two things: a law that establishes it as legal tender, and broad social acceptance to use it as a means of payment and unit of account.
A central bank manages its issuance and monetary policy: it sets interest rates, regulates the money supply, and works to keep the payment system stable. Inflation (the sustained loss of that currency's purchasing power) is one of the central risks of this system, and in countries like Argentina, Venezuela, or Colombia, it is a variable that businesses and users know well.
2. What a stablecoin is (in short)
A stablecoin is a digital token, issued on a blockchain, designed to maintain a 1:1 peg with a specific fiat currency. It is not a speculative cryptocurrency like Bitcoin or Ethereum, nor a new currency with its own monetary policy: it is a digital representation of a currency that already exists.
The most precise definition comes from the GENIUS Act, the first US federal law governing payment stablecoins, signed in July 2025: a payment stablecoin is a digital asset redeemable at a fixed value, used as a means of payment or settlement, issued by a supervised entity, and backed by high-quality reserve assets. (For a deeper dive into how they work, we already wrote a dedicated guide: What is a Stablecoin?)
3. How a stablecoin's backing is built
In Twin's case, each stablecoin (ARGt, BRAt, COLt, PERt, MEXt, CHLt, BOLt, URYt, PRYt, VENt) is backed by a combination of assets: local-currency sovereign instruments, money market funds, bank deposits, and local-currency stablecoins issued by other participants in the ecosystem. When those local assets aren't available, a portion of the reserve may be held in high-quality USD-denominated stablecoins, solely as a measure to preserve full backing. Composition varies by token.
That backing is always equal to or greater than the amount of tokens in circulation.
4. Three key differences between fiat and a stablecoin
- Issuer. Fiat is issued by a central bank with exclusive legal authority. A stablecoin is not necessarily issued by a central bank: it's typically issued by a regulated private company, under a verifiable reserve framework.
- Where it lives. Fiat circulates through bank accounts and cash. A stablecoin circulates on a public blockchain, where anyone can verify transactions.
- What sustains its value. Fiat is sustained by law and institutional trust in the central bank. A stablecoin is sustained by a concrete, auditable reserve asset behind each token.
5. How it also differs from Bitcoin
It's a common mistake to lump all cryptocurrencies into the same category. Bitcoin has no issuer and no backing, its maximum supply is fixed in the protocol (21 million), and its price floats freely based on supply and demand. A stablecoin has no protocol-defined issuance cap: its circulating supply grows or shrinks based on real payment demand, and each unit corresponds to an equivalent reserve asset. Bitcoin aims to be a decentralized, volatile store of value. A stablecoin aims to be stable money for transactions, holding the same peg as the fiat currency it represents.
6. What a stablecoin is used for today in the region
- Supplier payments in local currency (Argentina, Brazil, Colombia, Mexico)
- Remittances and cross-border transfers
- Settlement between exchanges, fintechs, and other institutions
- Operational liquidity management for companies operating across multiple countries
These aren't savings or investment use cases. They're payment infrastructure that runs alongside the fiat system, not in its place.
7. FAQ
Is a stablecoin the same as digital fiat money?
No. It's a digital representation of that currency, backed by assets, but issued by a regulated private company, not necessarily by a central bank.
How is it guaranteed that a stablecoin keeps its peg to fiat?
Through the composition and transparency of its reserves, which must always be equal to or greater than the tokens in circulation.
What is the GENIUS Act?
It's the first US federal law regulating payment stablecoins, signed in July 2025. It sets the requirements an issuer must meet (supervision, permitted reserve asset types, redemption at fixed value) and establishes a standard that today serves as a reference for regulators in other regions, including Latin America.
What does the GENIUS Act say about stablecoins?
It defines them as digital assets redeemable at a fixed value, issued by supervised entities, and backed by high-quality reserve assets.
Do stablecoins replace the banking system or fiat?
No, they operate on top of and alongside existing financial infrastructure. Their role is to speed up payments and settlement in the same fiat currency they represent, not to replace it.
Twin Stablecoins are digital payment instruments backed by reserve assets. They are not securities, investment products, or insured bank deposits. They are not legal tender and are not guaranteed by any government. This content does not constitute financial, investment, or legal advice.