How This Glossary Is Organized
Every stablecoin payment passes through five parts of a stack: the issuer, the settlement chain, the network layer, licensed providers and local rails. This glossary groups each term under the part of the stack where you are most likely to meet it. For deeper reading on stablecoin settlement, treasury, emerging market corridors and the infrastructure behind them, Tazapay's payment and stablecoin guides cover each topic in full.
Issuer Terms
Stablecoin. A digital token designed to hold a steady value, usually pegged one to one to a currency such as the US dollar. There are several types of stablecoins, but fiat-backed coins dominate business payments.
Issuer. The company that creates a stablecoin and stands behind its value. Circle, for example, issues USDC and EURC.
Reserves. The cash and short-term assets an issuer holds to back the stablecoins in circulation. For a fiat-backed stablecoin, reserves are what make one token worth one dollar.
Attestation. A regular report from an independent accounting firm confirming that an issuer's reserves match or exceed the tokens in circulation. Treasury and compliance teams use attestations to judge issuer quality.
Mint and burn. Minting creates new stablecoins when money is deposited with the issuer. Burning destroys them when they are redeemed. Supply rises and falls with demand through these two actions.
Redemption. Exchanging stablecoins with the issuer for the underlying currency. Fast, reliable redemption is what keeps a stablecoin at its peg.
Peg and depeg. The peg is the fixed value a stablecoin aims to hold, such as one US dollar. A depeg is when the market price moves away from that value, usually because of doubts about reserves or redemption.
Chain Terms
Layer 1. A base blockchain that records and finalizes transactions on its own, such as Ethereum or Solana. Ethereum's documentation describes layer 1 chains as the foundation other projects build on.
Layer 2. A separate blockchain that runs on top of a layer 1 and relies on it for security. Layer 2 networks usually offer lower fees and faster confirmations. Our guide to layer 1 and layer 2 blockchains for payments explains how both fit into a stablecoin payment.
Rollup. The most common type of layer 2. It bundles many transactions into one transaction on the base chain, so the fee is shared and each payment costs less.
Payment blockchain. A layer 1 blockchain built specifically for stablecoin payments. Payment blockchains usually price network fees in stablecoins and aim for very fast finality. Arc, from Circle, is one example. We compare the main ones in what payment blockchains are and how they differ.
General-purpose chain. A blockchain designed to run any kind of application, from trading to games. Payments compete with all other activity for space, so fees can rise with demand.
Validator. An operator that checks transactions and adds them to the chain. On a permissioned chain, validators are a known, approved group. On a permissionless chain, anyone meeting the technical rules can take part.
Consensus. The method validators use to agree on the order and validity of transactions. Different consensus designs trade off speed, openness and resilience.
Finality. The point after which a transaction cannot be reversed. Deterministic finality means a transaction is final as soon as it is confirmed, with no later reordering.
Gas. The fee paid to the network to process a transaction. On many chains gas is paid in the chain's own token. On payment-focused chains such as Arc, it is paid in USDC.
EVM compatibility. The ability to run software written for the Ethereum Virtual Machine. EVM-compatible chains let developers use familiar Ethereum tools.
Smart contract. Code deployed on a blockchain that runs automatically when set conditions are met. Stablecoins themselves are smart contracts.
Cross-chain transfer. Moving a stablecoin from one blockchain to another. Circle's Cross-Chain Transfer Protocol (CCTP) does this for USDC across supported chains.
Wallet. Software or hardware that holds the keys needed to send and receive digital assets. Businesses usually use custodial or multi-signature wallets rather than a single key.
Block explorer. A public website that shows transactions on a blockchain. Teams use explorers to confirm that a transfer has settled.
Onchain and offchain. Onchain activity is recorded on a blockchain. Offchain activity, such as a bank transfer or a compliance check, happens outside it. Most business payments mix both.
Network Terms
Payment network. A set of rules and messaging that lets licensed institutions send payments to each other. In stablecoin payments, the network coordinates and the blockchain settles.
Originating Financial Institution (OFI). The institution that starts a payment for the sender. It verifies the customer, converts local currency into stablecoins and sends them.
Beneficiary Financial Institution (BFI). The institution that receives a payment for the recipient. It converts stablecoins into local currency and pays out.
Counterparty directory. The list of vetted institutions a network member can send to. It replaces the need for a separate agreement with every partner.
Payment versus payment (PvP). A settlement method where two currency legs of a trade settle at the same moment, so neither side is exposed if the other fails. Arc's FX engine is designed for onchain PvP settlement between stablecoins.
Travel Rule. The name used for FATF Recommendation 16 when it applies to virtual assets. It requires sender and recipient information to travel with a transfer. FATF revised the standard in June 2025, with the changes due to take effect by the end of 2030.
Provider Terms
On-ramp. Converting local currency into stablecoins. In a business payment, this is usually done by the sending institution.
Off-ramp. Converting stablecoins back into local currency. Off-ramp depth, or how much can be converted at a fair rate, varies widely by market and matters most in emerging market corridors.
Fiat in, stablecoin across, fiat out. The most common business model for stablecoin payments, where neither sender nor recipient holds stablecoins. The stablecoin sandwich model works through this flow step by step.
KYB. Know Your Business checks that verify a company's identity, ownership and activity before it can send or receive payments.
Custody. Holding and safeguarding digital assets on behalf of a customer. Custody can be run in-house or outsourced to a specialist.
VASP. A virtual asset service provider, the term regulators use for firms that exchange, transfer or hold digital assets for others.
MSB. A money services business, a registration category used in countries such as Canada and the United States for firms that transmit or exchange money.
Local Rail Terms
These are general payment terms that matter for stablecoin flows. Our full payments glossary covers them alongside collections, FX and compliance terms.
Local rail. A domestic payment system that delivers funds to a bank account or wallet in a given country. The local rail often decides when a recipient actually sees the money.
Correspondent bank. A bank that holds accounts for other banks and processes cross-border payments for them. A single payment can pass through several correspondents.
Nostro account. An account a bank or payment company holds with another bank in a foreign currency, used to pay out in that market.
Prefunding. Placing money in payout accounts in advance so payments can go out quickly. Faster settlement between institutions can reduce how much prefunding a business needs. How much this matters depends on your model, as the pros and cons of stablecoin rails for fintechs show.
FX spread. The gap between the rate a provider gives you and the market rate. In stablecoin payments, the spread at the off-ramp is often the largest single cost.
Settlement time and payout time. Settlement time is when funds are final between institutions. Payout time is when the recipient can use them. A payment can settle onchain in seconds and still wait for a local cut-off.
Sources
- ethereum.org, What is layer 2? (2026). https://ethereum.org/en/layer-2/learn/
- Circle, Introducing Arc: An Open Layer-1 Blockchain Purpose-Built for Stablecoin Finance (August 2025, updated May 2026). https://www.circle.com/blog/introducing-arc-an-open-layer-1-blockchain-purpose-built-for-stablecoin-finance
- FATF, Changes to FATF Standards: Recommendation 16 on Payment Transparency (June 2025, updated October 2025). https://www.fatf-gafi.org/en/publications/Fatfrecommendations/update-Recommendation-16-payment-transparency-june-2025.html
