Definition ∞ A fiat-backed digital asset is a cryptocurrency designed to maintain a stable value by being pegged to a specific national currency, such as the US dollar or the Euro. The issuer holds reserves of the corresponding fiat currency equivalent to the circulating supply of the digital token. This backing mechanism aims to provide price stability.
Context ∞ The growth and regulation of fiat-backed stablecoins are subjects of intense global discussion, particularly concerning reserve adequacy, transparency, and their role in the broader financial system. Regulatory pronouncements and the operational status of major stablecoin issuers are key indicators for market participants. Their utility as a bridge between traditional finance and digital assets makes them central to many economic analyses.
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