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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