Fiat-Backed Stablecoin

A fiat-backed stablecoin, sometimes called a reserve-backed stablecoin, is a token whose issuer promises to hold traditional assets such as bank deposits and short-term government securities to match the tokens in circulation. The issuer creates tokens when a customer deposits currency and destroys them when currency is redeemed, aiming to keep the token trading near one unit of the reference currency. The model concentrates trust in the issuer and its banks: users depend on the reserves being real, liquid, and legally available for redemption. Reserve reports, banking partners, and the issuer's legal jurisdiction therefore matter as much as the code, and the peg is a commercial and legal commitment rather than a mathematical guarantee.