What are stablecoins?
A stablecoin holds its value when the issuer will exchange it for the currency it names, at par, on demand. What backing actually means, and how to check it yourself.
Overview
A stablecoin is a token designed to hold a constant value against something else, almost always a national currency. The token trades on a blockchain and the value it tracks sits somewhere off it, usually as cash in a bank account. That gap between where the token lives and where the money lives is the whole subject.
A stablecoin holds its value when the issuer will exchange it for the currency it names, at par, on demand. Almost everything a reader wants to know reduces to whether that is true and how they could tell.
The second half of that sentence is where this page differs from a general definition. Every reserve-backed issuer says its token is backed. What separates them is what they publish, who signed it, and what that signature actually covers, and those differences are visible only in the documents. The sections below walk real tokens from a full external examination down to an issuer's own internal audit and a check that covers only the chain.
How it works
Three mechanisms are in common use and they fail differently.
The dominant design is a reserve-backed token. Someone deposits currency with an issuer, the issuer mints tokens against it, and holders can redeem tokens for currency later. The peg holds because redemption is available, so the token's credibility is the issuer's willingness and ability to pay. EURC, USDC and PHPC all work this way.
The second design over-collateralises with other crypto assets and manages the peg with liquidation rules rather than a bank account. In the Sky protocol, for example, collateral from an insufficiently collateralized vault is transferred to the protocol and auctioned to cover its debt. Nothing needs to be redeemed at a counter, which removes the issuer risk and replaces it with collateral volatility.
The third design held the peg with an algorithm and a paired token. The best-known example, TerraUSD, was meant to hold its dollar peg by being interchangeable for a second token, LUNA, and in May 2022 it depegged and fell to close to zero, according to the US Securities and Exchange Commission. The word stablecoin still covers this design.
For a reserve-backed token, the question is this stable is mostly a question about a bank balance that no blockchain can see.
Sources: Circle transparency, Coins.ph PHPC whitepaper, Sky developer documentation, collateral liquidation, SEC press release 2023-32, Terraform Labs and Do Kwon
What backing actually means
Backed is the most overworked word in this market. It carries at least four different meanings in practice, and the difference is visible only in the documents.
At the strong end an external accounting firm examines the reserve on a stated schedule and publishes a report a reader can open. Circle's August 2026 report on EURC is signed by Deloitte & Touche LLP, and Circle publishes these reports monthly in a series unbroken from June 2022. The August report shows the reserve held as cash at regulated financial institutions. Read what the opinion covers, though, because it is narrower than the report it introduces. Deloitte examined one assertion by the management of Circle Internet Group, Inc., that the fair value of the assets held in the reserve is equal to or greater than EURC in circulation at the report dates. That is an inequality. The circulation figure it is measured against is a line in management's own report, computed from criteria management defines. So the document is evidence that the reserve covered the tokens. It is not a separate opinion on the number of tokens.
One step down, a report exists and the signature does not carry independence. Coins.ph published reports for PHPC titled Proof of Reserve attestations, the latest as of 31 May 2025, whose opinion section is headed Internal Audit Report. They were performed by the Coins.ph Internal Audit Department under the Institute of Internal Auditors' standards and signed by the company's Chief Audit Executive, with the management assertion signed by the CEO. No external accounting firm appears in them. That is a real internal control and a different instrument from a third-party attestation.
Lower again, the independent check covers the wrong half. Transfero states that BRZ's on-chain activity is publicly verifiable, with independent audits conducted by Parsiq, which is a blockchain data company. What a firm of that kind can check is the onchain leg, which Transfero itself says anyone can verify. No accountant's attestation of the reais held in reserve is published.
At the bottom there is no reserve report at all, and backed rests on the issuer's statement alone.
Four meanings of one word. A reader who takes backed at face value cannot tell them apart, and the documents separate them immediately.
Regulated is a separate claim again. cNGN's developer documentation calls it Africa's first regulated stablecoin, and regulated is a claim about a company's permissions rather than a claim about money in an account. Nigeria's Securities and Exchange Commission named its issuer, Wrapped CBDC Ltd, in a circular of 2 July 2026 granting an Approval-in-Principle, and the Commission wrote in that same document that an Approval-in-Principle is not a final licence. The reserve evidence for cNGN sits elsewhere: its transparency page links monthly attestation reports, the latest as of 31 August 2026.
One more distinction sits inside the strong end rather than below it, and it is the one most likely to catch a careful reader out. An attestation usually assures part of its own contents and not all of them. BiLira's August 2026 report on the lira token TRYB carries a notes section under its own header, No Assurance Provided by the Independent Auditor on These Notes, and the auditor states that the information there has not been subjected to the procedures applied in the examination. The reserve balance is inside the opinion. The description of the accounts holding it is not. So the useful question is not only who signed a report, it is which parts of the report they signed for.
Sources: EURC Examination Report, August 2026, Circle transparency, Coins.ph PHPC Proof of Reserve report, as of 2025-05-31, Transfero BRZ, cNGN developer documentation, cNGN transparency, SEC Nigeria circular, 2 July 2026, BiLira reserve report, 17 August 2026
How to verify a stablecoin yourself
The question splits into two halves with very different answers, and knowing which is which is most of the skill.
The onchain half is open to anyone. How many tokens exist, and on which chains, are facts held in contract state, and reading them needs no permission from an issuer. That is a property of blockchains rather than a service anyone provides.
The off-chain half cannot be read from a blockchain at any level of effort. No onchain read confirms a bank balance. That answer comes from a reserve report or it does not come at all, which is why who signed the report and what they examined does so much work.
One trap sits between the halves. The total supply of a token is not the same quantity as the amount issued to holders, and the gap can be large. Circle's August 2026 attestation nets out 63,477,630 EURC that exist on Solana as tokens allowed but not issued, against a total supply of 454,011,923 at 31 August 2026, so a naive cross-chain sum overstates issued EURC by about 16 percent. Any figure presented as how much of a stablecoin exists should say which of the two quantities it is.
A second trap sits under the first. On some tokens a supply read is a point in time rather than a level. BiLira's TRYB cycles a large mint and burn through its Ethereum contract, and two correct reads of that contract one block apart on 30 July 2026 differed by more than four times. Where that happens, a supply figure without the moment it was taken is not a number a reader can use, and a ratio built on it describes an instant rather than the coin.
The strongest thing a reserve report can do for a reader is name a perimeter and an instant, because that is what makes it testable. A report that lists the contracts it counts and the moment it counts them can be checked against chain state at that moment by anyone.
Sources: EURC Examination Report, August 2026, Circle transparency, TRYB token contract on Ethereum
Beyond the dollar
Nearly every stablecoin discussion is a dollar discussion. The Bank for International Settlements wrote in its June 2025 Annual Economic Report that over 99% of stablecoins are US dollar-denominated.
The tokens pegged to other currencies still show the mechanics clearly. BiLira's lira token TRYB publishes reserve reports running back to 2020, and the 2026 entries are independent auditor's reports signed in Istanbul by a named external Turkish sworn-in CPA firm, conducted under International Standards on Auditing to obtain reasonable assurance and concluding with an opinion in the affirmative. The 17 August 2026 report gives 61,600,302 TRYb issued and outstanding against TL 66,400,788.00 held in custody accounts, and it fixes a Report Date and Time of 12:00 GMT +3 so that figure can be checked at the moment it names. None of it is discoverable by search, because BiLira's reports carry no text layer, so the auditor's name and the criteria exist only in the rendered document.
It is also not a clean bill of health, which is the more useful half of the example. No custodian bank is named in any of the three 2026 reports. The criteria the opinion is anchored to place the reserve at federally insured TL depository institutions, while in Türkiye deposit insurance is administered by a single national body, the Savings Deposit Insurance Fund. Real assurance and imperfect drafting sit in the same document, and only reading it tells you which parts are which.
The Singapore dollar token XSGD shows the other half of the same idea. Its issuer publishes a per chain breakdown alongside an attested total, and its report names both the chains it counts and the minute it counts them at, which makes a reconciliation possible rather than only a comparison.
Non-dollar tokens also answer a different question from the dollar ones. A lira, naira or peso stablecoin exists because someone wants that currency onchain, and in some markets the demand runs the other way entirely: the BIS notes that stablecoins are an attractive alternative for users in countries with high inflation, capital controls or limited access to dollar accounts.
Sources: BIS Annual Economic Report 2025, chapter III, BiLira reserve report, 17 August 2026, BiLira reserve report, 21 May 2026, BiLira reserve report, 20 February 2026, BiLira reserve report index, TMSF, coverage and limit of deposit insurance, XSGD SCS Reserve Account Report, 30 June 2026
Risks
The risks that matter are mostly not the ones the word stable suggests.
Reserve risk is the first. A reserve-backed token is a claim on an issuer, and a reserve held as bank deposits carries the credit standing of the banks holding it. Where those banks are not named, as in BiLira's 2026 reports for TRYB and Transfero's disclosures for BRZ, that exposure cannot be assessed by a reader at all.
Disclosure risk is the second. A token whose reserve is real but undocumented and a token whose reserve is not there look identical from outside. Absence of evidence is the condition a reader is usually in, and it is worth naming as such rather than reading it as reassurance.
Redemption risk is third and it is routinely misread. An issuer stating that a token is redeemable at par is describing the right that backs the peg, not confirming that any given holder can exercise it. Terms, minimums, fees and eligibility are not always stated, and redemption mechanics are what separate a claim on reserves from a token that merely trades near its peg.
Measurement risk is the last and the least discussed. A supply figure taken without a stated moment, a reserve ratio whose denominator moves between reads, and an attested total compared against a different quantity than the one it attests will each produce a number that looks precise and answers nothing.
Sources: BiLira reserve report, 17 August 2026, Transfero BRZ
Common questions
A token designed to hold a constant value against something else, almost always a national currency, which holds that value when the issuer will exchange it for the currency it names, at par, on demand.
It depends entirely on the token, and the word backed carries at least four different meanings in practice. At one end an external accounting firm examines the reserve on a schedule and publishes the report, as Deloitte does monthly for Circle's EURC. At the other there is no reserve report at all, only the issuer's statement. The marketing language is similar in both cases and the documents are not.
Half of it. How many tokens exist, and on which chains, are facts held in contract state and open to anyone. Whether currency sits in a bank account against them cannot be read from a blockchain at any level of effort, so that half comes from a reserve report or it does not come at all.
Less than its title suggests, and the difference is worth reading for. An attestation is usually an opinion on one specific assertion by the issuer's management rather than an audit of the company, parts of the document are often explicitly outside the assurance, and the strength of the conclusion varies between a positive opinion and a statement that nothing came to the accountant's attention. The document says which.
They are different claims. Regulation describes a company's permissions; backing describes money in an account. A token can be described as regulated on the strength of an approval-in-principle that the regulator's own circular says is not a final licence, so the reserve evidence has to be read separately, in the issuer's reserve reports.
Every coin named on this page has its own entry in the stablecoin explorer, with the contracts DIA verified and the supply read from each of them.