Assets pegged to a stable value.
WHAT THEY ARE
Digital assets intended to hold a constant value, usually against a currency.
WHY THEY EXIST
Volatility makes other assets unsuitable for payment and for holding between transactions.
WHAT THE TYPES ARE
Backed by reserves of the currency and equivalents Backed by other digital assets, over-collateralised Algorithmic, maintaining the peg by supply adjustment
WHAT RESERVE-BACKED MEANS
An issuer holds assets and promises redemption.
WHAT THAT DEPENDS ON
The issuer's solvency and honesty.
WHAT TO EXAMINE
What the reserves actually consist of Whether they are independently verified Whether redemption is available in practice
WHY COMPOSITION MATTERS
Reserves of cash differ substantially from reserves of other instruments.
WHAT OVER-COLLATERALISED DESIGNS REQUIRE
More value locked than issued, with liquidation when it falls.
WHAT THEY RISK
Cascading liquidations during sharp movements.
WHAT ALGORITHMIC DESIGNS ATTEMPTED
Maintaining a peg without backing.
WHAT HAPPENED
Major examples collapsed, destroying very large sums.
WHAT THAT DEMONSTRATED
That confidence-dependent pegs fail when confidence does.
WHAT STABLECOINS ARE USED FOR LOCALLY
Holding value against currency movement, and cross-border transfer.
WHAT TO ESTABLISH
The regulatory position, which is specific and changing. Take advice.
