Ethereum's Vitalik Says Algorithmic Stablecoins Are 'True DeFi': Here's Why

Ethereum co-founder Vitalik Buterin said on February 8, 2026, that algorithmic stablecoins should be considered a form of true DeFi. He emphasized the structural advantages of such models, particularly when collateralized by Ethereum, as they can transfer counterparty risk to market makers. Buterin's comments come amid ongoing discussions around stablecoin regulation.

The co-founder drew a distinction between algorithmic stablecoins and the current approach of depositing USDC into DeFi protocols, which he does not consider 'true DeFi'. He argued that well-designed algorithmic models have a key benefit: they can shift USD-based counterparty risk away from stablecoin holders and into the market making infrastructure. This, he said, is a structural advantage that could enhance the resilience of the system.

Buterin outlined a two-stage approach to stablecoin design. First, he suggested that Ethereum-collateralized models should be prioritized. These would shift risk to market makers while still offering USD-like utility. Second, he proposed moving to diversified RWA-backed models, which he said could reduce single-asset risk if implemented with sufficient asset diversity.

Why This Approach Matters

Algorithmic stablecoins built on Ethereum could offer a more decentralized alternative to existing models, according to Buterin. He believes these structures can provide more transparency and reduce dependency on centralized entities like banks or custodians. This aligns with broader DeFi goals of removing intermediaries from financial systems.

Buterin also raised concerns about the current practice of using USDC in DeFi protocols. He argued that such models do not fully capture the decentralized nature of DeFi. In his view, true DeFi stablecoins must be self-sustaining and not rely on centralized backing.

What Analysts Are Watching

The White House is set to host a meeting on February 10, 2026, to address ongoing tensions between banks and crypto firms over stablecoin regulations. The meeting aims to find a compromise on whether stablecoins should be allowed to offer interest to users. Banks have expressed concerns that interest-bearing stablecoins could draw deposits away from traditional financial institutions, potentially destabilizing the system.

Crypto firms and trade groups, including Coinbase, Ripple, and Circle, are expected to attend. The discussion is closely tied to the stalled CLARITY Act of 2025, a bipartisan bill that seeks to establish clearer rules for crypto markets and stablecoins.

Buterin's comments highlight the broader debate over what constitutes 'true DeFi.' As policymakers and market participants seek clarity, the outcome of the White House meeting could shape the future of stablecoin regulation and the evolution of decentralized finance.