There exist entirely crypto-backed stablecoins. DAI is an example of such coins. The best part of DAI is that it is fully decentralized. It's on Ethereum and it's pegged to the US dollar through smart contracts. How it works is that users deposit cryptocurrencies as collateral and take out loans in DAI. DAI is over-collateralized to start with. The risk for the lender is that their crypto-collateral loses value in which case their collateral could get liquidated. DAI pays a variable interest rate to the lenders as a way to automatically regulate the supply of collateral to make sure all the DAI in circulation are fully backed. Because DAI runs on a smart contract on Ethereum, there is no KYC and nobody can freeze your assets.
Centralized stablecoins not as useful. While the government can't freeze any particular user's account, a government having the proper jurisdiction can go after the organization who owns the bank accounts in which the all the collateral is.
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DAI is one of the most interesting ones out there. There are other risks outside of centralization risks that are carried with other coins - i.e. USDT. Instead, DAI is protocol-driven and not entirely decentralized, but much more so than others.
I don't trust any stablecoins to be completely honest and I also don't see much of a point in holding any signficant value in a stable coin (for someone in my position) outside of temporarily when I'm in between Bitcoin buying opportunities.
Holding BTC is my "stable coin". It's the thing I hold on to and expect to not only hold its value, but increase over the long haul. That said, I still see the value in crypto-backed loans and other use cases like the DAI ecosystem.
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