Fiat-Backed Stablecoin
A stablecoin backed 1:1 by cash and short-term government debt held in reserve — the dominant, and now regulated, model.
A fiat-backed stablecoin holds one unit of real reserves — cash and short-term Treasuries — for each token issued, redeemable at $1. USDT and USDC are the giants, and this reserve model dominates the stablecoin market (which crossed $300 billion in 2025).
The trust question is simple and constant: are the reserves real, sufficient, and liquid? Post-2022, serious issuers publish regular attestations of holdings. 2026’s GENIUS Act codifies this — mandating 1:1 backing in cash or short-term Treasuries, monthly reserve disclosure, and KYC/AML compliance for US stablecoin issuers. The residual risks are issuer solvency and, ironically, the traditional banks holding the reserves.