Cash Reserves

Definition ∞ Cash reserves represent liquid assets held by an entity to meet immediate financial obligations. Within the digital asset domain, these holdings are critical for stablecoins to maintain their peg, ensuring each token is backed by an equivalent value of traditional currency or highly liquid securities. They also provide operational liquidity for cryptocurrency exchanges and other digital asset firms, facilitating smooth transaction settlements and withdrawals.
Context ∞ The transparency and verifiable auditing of cash reserves for stablecoin issuers remain a central point of regulatory scrutiny and market discussion. News reports frequently analyze the composition and custodial arrangements of these reserves, impacting investor confidence and the perceived stability of specific digital currencies. Ensuring sufficient and readily accessible reserves is a continuous challenge for the sector.