Stablecoins: Issuers, Backing, and What to Verify

Entry last verified September 2026.

The categories

Type	Backing	Verification method	Principal risk
Fiat-backed	Cash and short-term government debt	Issuer attestation	Reserves unavailable or misstated
Crypto-collateralised	Over-collateralised crypto in contracts	On-chain, directly	Crash outruns liquidations
Algorithmic	Mechanism only	Not verifiable	Confidence collapse

The third category has failed repeatedly and at scale. It is included for completeness rather than as a live option.

What to verify for a fiat-backed stablecoin

Reserve composition. Not the headline total. What the reserves consist of: cash held where, government debt of what maturity, and any other instruments. This is published in attestation reports.

Attestation frequency and firm. Monthly attestations by a recognised accounting firm are meaningfully different from an annual statement by an unknown one.

Regulatory status. Which framework the issuer operates under, and what that framework requires of reserves and redemption.

Redemption rights. Whether holders can redeem directly with the issuer, or only through venues. Most retail holders cannot redeem directly, which means the peg is maintained for them by arbitrage rather than by a right they hold.

Freeze capability. Major issuers can freeze specific addresses on request from law enforcement. This is a feature to regulators and a risk to holders, and it applies to the largest fiat-backed tokens.

What to verify for a crypto-collateralised stablecoin

Collateralisation ratio. Published on-chain and continuously verifiable.

What the collateral is. A stablecoin backed largely by other stablecoins inherits their risks.

Liquidation mechanics. What happens if collateral falls faster than the system can liquidate.

The historical record worth knowing

A major fiat-backed stablecoin traded well below its peg for approximately two days in March 2023, when a portion of its reserves was held at a bank that failed over a weekend. It recovered once deposits were guaranteed.

An algorithmic stablecoin collapsed to near zero in May 2022, taking its paired token with it and erasing tens of billions of dollars of nominal value within a week.

Both events are the reason the questions above are worth asking rather than assuming.

What a stablecoin is not

Not a bank deposit. No deposit insurance. In an issuer failure, holders are unsecured creditors.

Not risk-free yield. Platforms paying a return on stablecoins are lending them. The return comes from a borrower.

Not necessarily censorship-resistant. See freeze capability above.

The practical exit route

For most holders the redemption path runs through a venue rather than through the issuer, which makes the availability of direct fiat pairs the thing that determines whether a stablecoin is usable as an exit or only as trading collateral.

Those pairs are listed by exchanges quoting a direct fiat pair and others, and checking which stablecoins a venue will actually convert to currency is worth doing before choosing which one to hold.