Fiat collateral refers to traditional government-issued currencies, such as US dollars or Euros, used to back or secure other financial instruments or digital assets. In the cryptocurrency space, it commonly serves as reserves for fiat-backed stablecoins, ensuring their value remains pegged to a conventional currency. This backing provides a tangible asset against which the digital token can be redeemed.
Context
The use of fiat collateral for stablecoins is a central topic in discussions about their stability, transparency, and regulatory oversight. Regulators often scrutinize the auditing and management of these reserves to ensure they are genuinely held and sufficient to cover the circulating supply of stablecoins. News frequently covers debates regarding the trustworthiness and regulatory frameworks surrounding fiat-backed stablecoins, impacting their adoption and market perception.
The protocol's RWA-backed USD0 stablecoin and its revenue-sharing tokenomics establish a new primitive for capital-efficient, user-owned decentralized banking infrastructure.
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