🏦 Fiat-Backed Stablecoins
Fiat-backed stablecoins are pegged 1:1 to a fiat currency, typically USD or EUR. They maintain stability by holding equivalent fiat reserves in banks or custodial accounts. These stablecoins are widely used for payments, trading, and treasury management because they offer simplicity and liquidity.
Key Features
- Pegged to fiat: Each token is backed by an equivalent amount of fiat currency.
- Centralized custody: Reserves are typically managed by a trusted issuer.
- High liquidity: Accepted on most exchanges and wallets.
- Regulated: Often subject to oversight, audits, and transparency reporting.
Examples
- USDT (Tether) – USD-pegged, widely integrated in exchanges and DeFi platforms.
- USDC (USD Coin) – Regulated and transparent, issued by Circle.
- BUSD – Binance USD, historically widely used.
Pros & Cons
Pros
- Stable and predictable value
- High liquidity for trading and payments
- Simple to integrate in wallets and exchanges
Cons
- Centralized trust required
- Regulatory or custodial risk
- Not fully decentralized
Key Use Cases
- Payments & Settlements: Instant cross-border transactions without bank intermediaries.
- Trading & DeFi: Stable collateral or liquidity pair in decentralized exchanges.
- Treasury Management: Hold on-chain reserves without exposure to crypto volatility.
Fiat-Backed Stablecoins – FAQs
What are fiat-backed stablecoins?
Fiat-backed stablecoins are digital tokens pegged 1:1 to traditional currencies like USD or EUR. Each token is backed by a reserve of fiat held by a central issuer.
Can they lose their peg?
Rarely, but possible if the issuer mismanages reserves or faces insolvency.
Which blockchains support fiat-backed stablecoins?
Popular fiat-backed stablecoins like USDT and USDC exist on Ethereum, Solana, Tron, Polygon, and other major chains.
What are common use cases for fiat-backed stablecoins?
Payments, trading, DeFi collateral, treasury management, and cross-border remittances.
Recommended Reading / Next Steps
Updated about 6 hours ago