Stablecoin

The word stablecoin covers structures with little in common beyond the objective. Some are backed by reserves of cash and short-dated government paper held by an issuer that redeems at par with approved counterparties. Some are issued by a protocol against crypto collateral posted at well above the value issued and maintained by liquidations. Some have relied on an algorithm and an incentive design with no meaningful reserve behind them at all.

Where a redemption right actually comes from

Reserve backing and a right to redeem at par belong to the regulated categories of stablecoin, not to the word itself. Under MiCA an e-money token must be issued at par value on receipt of funds and redeemed by the issuer at par value, at any time, on the holder’s request, and holders of asset-referenced tokens have a right of redemption at all times. In the United States the GENIUS Act requires a permitted payment stablecoin issuer to hold identifiable reserves on an at least one-to-one basis from a closed list of assets and to publish a redemption policy — while separately defining an endogenously collateralized payment stablecoin, one relying solely on the value of another digital asset created or maintained by the same originator, which is precisely a token with no such backing. As things stand in September 2026 that Act is enacted but not yet in force: it takes effect on the earlier of 18 January 2027 or 120 days after final implementing regulations, which were still at proposed-rule stage.

Those are different risks wearing one label. What a holder should establish is who the issuer is and what it has actually promised, what the reserves consist of and where they are held, who is entitled to redeem and on what notice, and what the published attestations or proof of reserves really cover. USDC and USDT are the two most widely used dollar tokens, and they differ on several of those points.