Stablecoin reserves

Every fiat-backed stablecoin is only a claim on a pool of assets. Issuers usually keep part of that pool as bank deposits for daily redemptions and invest the rest in short-dated US Treasury bills, overnight reverse repurchase agreements and government money market funds. Some have also held commercial paper, secured loans, bitcoin or gold, which adds return but also risk.

Reserve composition is the first thing analysts check when judging a stablecoin. Highly liquid assets can be sold quickly to meet a wave of redemptions; long-dated bonds, corporate debt or deposits concentrated in one bank cannot. Rules such as MiCA in the EU and the GENIUS Act in the US now restrict eligible assets, require segregation from the issuer's own funds and set reporting duties.

Reserves are typically disclosed through monthly attestations, which show a snapshot but do not prove what happened between dates. The interest earned on them is the issuer's main revenue and is normally not passed on to holders. Even a fully reserved coin can wobble if the bank holding cash fails, as USDC showed in March 2023.