Fiat-Backed Stablecoin
A stablecoin backed by real-world assets like cash and government bonds, held in reserve by the issuer.
Fiat-backed stablecoins are the most straightforward type. For every token in circulation, the issuer holds equivalent real-world assets. USDC is fiat-backed, with reserves in U.S. Treasury securities and cash.
The advantage is simplicity and transparency. You can verify the backing through attestation reports. The disadvantage is that they require trust in the issuer to actually hold the reserves and honor redemptions.
Other fiat-backed stablecoins include USDT (Tether), which holds a mix of Treasuries, corporate bonds, and other assets, and PYUSD (PayPal USD). The quality and transparency of reserves varies significantly between issuers.
Related Terms
Stablecoin
A cryptocurrency designed to maintain a stable value, usually pegged 1:1 to a fiat currency like the U.S. dollar.
Algorithmic Stablecoin
A stablecoin that maintains its peg through automated smart contract mechanisms rather than holding real-world reserves.
Reserves
The pool of real-world assets (U.S. Treasuries, cash) held to back each USDC token at a 1:1 ratio.
Attestation
An independent third-party examination that verifies USDC reserves meet or exceed the amount of USDC in circulation.
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This definition is provided for educational purposes. USDC.org is an independent resource and is not affiliated with Circle Internet Financial.