A reserve-backed stablecoin makes a simple promise: one token can be exchanged for one unit of a currency. Whether that promise holds depends on three things the token itself cannot show you.
What is in the reserve
Cash at a bank, short-term government bills and riskier assets all behave differently under stress. A reserve can match the tokens outstanding on paper and still be unable to pay quickly if much of it must be sold first.
How fast it turns into cash
Redemptions tend to arrive in waves. The relevant comparison is not total reserve against total tokens, but cash available today against requests made today. The redemption coverage model on the Digital Assets page lets you test exactly that gap.
Who has a claim, and at what price
The Financial Stability Board’s 2023 recommendations for global stablecoin arrangements call for users to have a robust legal claim and timely redemption, and, for coins referenced to a single fiat currency, redemption at par into fiat. In the European Union, the Markets in Crypto-Assets Regulation (MiCA) gives holders of e-money tokens a right of redemption at par value.
The wider debate
The Bank for International Settlements argued in its 2022 Annual Economic Report that stablecoins struggle to provide the “singleness” of money, the guarantee that every unit trades at par with every other, which central-bank backing gives to bank deposits. That debate shapes how central banks think about tokenized money.