Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:
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Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as BiLira, which is pegged to the Turkish lira.
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Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
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Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ether, the native token of the Ethereum network, as collateral.
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Other investments: Tether’s USDT was once supposed to be backed 1-for-1 with dollars but its collateral mix has shifted over time, and in a breakdown provided in 2021 the company said nearly half its reserves are in commercial paper, a form of short-term corporate debt. It has not disclosed the issuers of this paper but claims it is all rated A-2 or higher (A-2 is the second-best grade available for a corporate borrower from credit rating agencies like Standard & Poor’s). Circle’s USDC, similarly, lists unspecified “approved investments” alongside accounts at federally insured banks (notably, it does not say whether the accounts themselves are insured) in its monthly disclosures