What Happens to Your Card Balance If a Stablecoin Depegs?

If a stablecoin depegs, the coins still sitting in your wallet can be worth less than a dollar each until the peg recovers, or for good if it doesn't. A prepaid crypto card works differently: once your deposit has been converted into a dollar card balance, that balance is no longer a token with a market price, so a later depeg of the coin you deposited generally doesn't reprice it. That is not a promise that nothing can go wrong; a card balance carries other risks. USDC fell below 90 cents in March 2023 when $3.3 billion of its reserves was stuck at a failed bank, then came back once regulators protected that bank's depositors, per the Federal Reserve and Circle. TerraUSD (UST) broke its peg in May 2022 and fell "to close to zero," per the SEC.

Most "depeg explained" pages are written for traders. This one is for people who spend.

This article is general information, not financial advice.

A peg is the value a stablecoin is designed to hold, usually one US dollar. How well it holds depends on what backs the token and whether holders can turn it back into dollars.

Fiat-backed stablecoins like USDC and USDT rest on two things.

Reserves. For each token in circulation, the issuer holds dollar assets, mostly cash and short-term US government debt. Circle says most of the USDC reserve is held in "the Circle Reserve Fund (USDXX), an SEC-registered 2a-7 government money market fund," and the rest in cash, "mostly among a handful of the world's largest banks," per its transparency page. Tether says "all Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether's Reserves," per Tether.

Redemption. The issuer promises to exchange tokens for dollars at face value. That promise anchors the market price: the Federal Reserve describes an issuer's direct customers as a channel between the issuer's fixed rate and exchange prices that helps "maintain the peg," per a 2024 FEDS Note.

The catch is who counts as a direct customer. At Tether, the minimum redemption is 100,000 USD, the fee is "the greater of $1,000 or 0.1%," and accounts must pass verification, per Tether's fees page. Most everyday holders sell on a market instead, at whatever price the market gives them.

Regulators have long spelled out what "backed and redeemable" should mean. New York's Department of Financial Services (NYDFS) requires stablecoins it oversees to have reserves whose market value is at least equal to all tokens outstanding at each day's close. Those reserves must be kept separate from the issuer's own assets and checked by an independent accountant at least monthly. Redemption must happen within two full business days, per its June 2022 guidance.

Depegs usually come from one of three failures, and they often feed each other.

A reserve is only as good as the place it is held. If part of it sits at a bank that fails, or is invested in something that loses value, holders start to wonder whether every token is still backed. The ones who move first get the best price, which gives everyone a reason to move first. That is the same logic as a bank run.

Some stablecoins aren't backed by dollars at all. The SEC described UST as an "algorithmic stablecoin" that "supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants' crypto asset securities, LUNA," per its 2023 complaint announcement. When a token's backing is another token from the same project, a fall in one can drag down the other, and neither has outside assets to fall back on.

A fully backed token can still trade below a dollar if people can't redeem fast enough. During the 2023 episode, Circle said USDC's "issuance and redemption is constrained by the working hours of the U.S. banking system," as quoted by the Federal Reserve. Bank wires don't move on weekends. Exchange prices do.

• March 10, 2023. California regulators closed Silicon Valley Bank and appointed the FDIC as receiver. Only deposits up to $250,000 per account were insured, per the FDIC. According to the Federal Reserve, Circle said that day it "had been unable to wire out $3.3 billion of USDC reserves."
• March 12, 2023. The Federal Reserve approved steps that let the FDIC resolve Silicon Valley Bank and Signature Bank "in a manner that fully protects all depositors, both insured and uninsured," per the Federal Reserve. Circle then said the $3.3 billion "will be fully available when U.S. banks open tomorrow morning," under the headline "Dollar De-peg Closes," per Circle.
• March 15, 2023. Circle said it had "cleared substantially all USDC minting and redemption backlogs," having redeemed $3.8 billion and minted $0.8 billion since Monday morning, per Circle.

Across March, USDC's market cap fell by about $10 billion, while USDT's rose by about $9 billion, per the Federal Reserve. Holders moved between issuers rather than leaving stablecoins.

The contrast is the lesson: USDC's reserves were real dollars that were briefly out of reach, while UST's backing was its own sister token, and nothing outside the project could restore it.

The GENIUS Act, signed in July 2025, is the US federal law for payment stablecoins. We cover it in depth in our GENIUS Act explainer. Here are the parts that bear on depeg risk.

• What reserves can be. Permitted issuers must hold reserves "on an at least 1 to 1 basis," made up of coins and currency, Federal Reserve balances, deposits at insured banks, Treasury bills, notes, or bonds with 93 days or less to maturity, and certain short-dated repurchase agreements, per the statute. A UST-style token whose only backing is its sister token does not fit that list.
• No lending the reserves out. Reserves "may not be pledged, rehypothecated, or reused" except in narrow cases, per the statute.
• Redemption procedures. Issuers must publish "clear and conspicuous procedures for timely redemption," per the statute.
• Algorithmic designs. The Act orders Treasury to study "endogenously collateralized" stablecoins, meaning tokens that rely "solely on the value of another digital asset created or maintained by the same originator," per the statute. That describes the UST model.

Here is the honest limit. Deposits at insured banks are still a permitted reserve asset, so a GENIUS-compliant issuer can still keep some cash at a bank that fails, which is exactly what happened to USDC in 2023. The rules make reserves safer and more visible. They don't guarantee a token never trades below a dollar during a panic. For how large these tokens have become, see our stablecoin statistics.

For a spender, the key question is what you are holding at each moment.

While the coins are in your wallet, you hold the stablecoin itself. If it trades at 95 cents, that is what 100 of them will fetch on a market. Every hour you hold is an hour of exposure to that issuer and to market prices, even if the risk is small most of the time.

After they become a card balance, it depends on how the card works. There are two broad models:

SolCard is the first model. When a USDC or USDT deposit is credited, our system works out a US-dollar amount and sends that dollar amount to the card issuing partner, which holds the card balance. When you pay, the card spends that dollar balance. It does not sell a token at checkout. So if the coin you deposited later slips below a dollar, the dollar balance on the card is not repriced to follow it.

What that does not mean:

• It doesn't make a card balance risk-free. The balance is held by the card program and its issuing partner, which brings its own risks. We aren't describing custody or insurance arrangements here, and nothing in this article is a guarantee that funds are safe.
• It doesn't protect coins you haven't deposited yet. Stablecoins still in your wallet carry full price exposure.
• It isn't a reason to move money around based on the price. If a stablecoin is trading off its peg, the sensible move is to understand why before you do anything.

For the network side of what happens after you tap, see how card networks settle in stablecoins.

You can't control an issuer's bank or a market panic. What follows is risk awareness, not investment advice.

• Holding time is exposure time. The longer stablecoins sit waiting to be spent, the longer they are exposed to that issuer.
• Know which issuer you hold. USDC and USDT are different companies with different reserves, banks, and published reports. Check each issuer's own transparency page rather than a summary.
• Treat algorithmic "stablecoins" differently. A token held up only by its own sister token has already failed completely once, at $40 billion scale.
• Keep basic wallet security. A depeg is rare. A drained wallet is more common. See our security basics for card users.

It trades below its target value, usually a dollar, on markets. Holders who sell during the depeg get less than a dollar per token. If the backing is sound and redemption comes back, as with USDC in March 2023, the price can recover. If the design fails, as with UST in May 2022, it may never recover.

No stablecoin is risk-free, and we won't claim otherwise. USDC is backed by reserves that Circle says are mostly in an SEC-registered government money market fund, with monthly third-party assurance, per Circle. It still dropped below 90 cents in March 2023 and took about three days to recover. The practical questions for a spender are how long you hold it before spending and what happens to its value along the way.

That depends on the card. On a prepaid card that converts your deposit into a fiat balance, the balance is not a token and is not repriced by the coin's market. On a card that sells your crypto at the moment of purchase, the coin's price at checkout matters. Either way, coins you haven't deposited are still exposed.

Not necessarily. The Act requires high-quality reserves and redemption procedures, but insured bank deposits are still an allowed reserve asset, and USDC's 2023 problem was cash held at a bank that failed. A token backed only by its own sister token, like UST, would not meet the Act's reserve requirements.

A depeg is a market price event that hurts most when you hold the token and have to sell while it lasts. USDC recovered in 2023 because its backing was real; UST did not, because its backing never existed outside the project. For a spender, the useful questions are what you hold, from which issuer, and for how long. On a prepaid card, price exposure mostly sits in the wallet before the deposit, not in the card balance afterward.

If you want your stablecoins converted into a dollar card balance before you spend, see how SolCard works.

• Federal Reserve -- Primary and Secondary Markets for Stablecoins, FEDS Notes (February 23, 2024)
• Federal Reserve -- Press release on SVB and Signature Bank resolution (March 12, 2023)
• FDIC -- FDIC Creates a Deposit Insurance National Bank of Santa Clara (March 10, 2023)
• Circle -- $3.3 Billion of USDC Reserve Risk Removed, Dollar De-peg Closes (March 12, 2023)
• Circle -- March 15, 2023 Update on USDC Operations
• Circle -- Transparency & Stability
• Tether -- Transparency
• Tether -- Fees
• NYDFS -- Guidance on the Issuance of U.S. Dollar-Backed Stablecoins (June 8, 2022)
• SEC -- SEC Charges Terraform and CEO Do Kwon with Defrauding Investors in Crypto Schemes (February 16, 2023)
• SEC -- Terraform and Kwon to Pay $4.5 Billion Following Fraud Verdict (June 13, 2024)
• SEC -- Tai Mo Shan to Pay $123 Million for Negligently Misleading Investors About Stability of Terra USD (December 20, 2024)
• GENIUS Act, Public Law 119-27