Digital assets Intermediate
The parity of a stablecoin
Parity is not a property of the instrument. It is the result of a reserve, of a redemption, and of who audits them.
- Author
- FINOVEX Academy
- AI-generated text
- Published
- Reading time
- 8 min read
A stablecoin promises to be worth one unit of reference. This promise is sustained by three verifiable things: what makes up the reserve, who can redeem at par, and who attests to the first item independently.
The composition of the reserve
A reserve in bank deposits and very short-term sovereign securities has distinct behavior from a reserve in private credit or in another digital asset. The difference does not appear on a calm day; it appears on the day when many redeem at the same time.
The right of redemption
Ask who exactly can present the coin to the issuer and receive the unit of reference. When this right belongs only to a handful of institutional counterparties, the common holder depends on the secondary market to exit - and that is where parity breaks first.
- Composition and average term of the reserve, with reference date.
- Scope of the right of redemption and the minimum required value.
- Frequency and nature of the attestation: independent audit or report from the issuer itself.
- Jurisdiction of the issuer and regime applicable to the reserve.
