Stablecoins supported by legal tender are similar to holder banknotes from the National Bank era of the United States (1865-1913): at that time, banks issued notes that could be exchanged for government greenback or gold and silver, and their value depended on the bank’s reputation and the holder’s ability to redeem them. Today’s fiat currency supports the 1:1 convertibility of stablecoins with a given fiat currency, but just as holders in the 19th century relied on secondary markets to exchange notes that could not be directly redeemed, modern users rely on platforms such as Uniswap or centralized trading platforms to exchange tokens for US dollars at parity (if not directly redeemed). This reliable convertibility – enforced through audited reserves and strong trading infrastructure – has established the same level of confidence for stablecoins supported by fiat currency as the widespread exchange guarantee for banknotes over a century ago.
BINANCE Rebate invitation code:F2222
HTX Rebate invitation code:888ee
GATE Rebate invitation code:FFFFTTTT
Stablecoins supported by fiat currency maintain a 1:1 peg by fully pledging each digital token as an equivalent fiat currency held off chain. For example, each USDCToken is supported by a combination of $1 in cash and short-term US government debt. According to the current reserve disclosure, every 1 USDC is supported by US treasury bond bonds of about 0.885 dollars and cash of 0.115 dollars. The cash portion is held by regulated financial institutions, while treasury bond bonds (including short-term securities and overnight treasury bond repurchase agreements) are held by Bank of New York Mellon and managed by BlackRock.