Definition ∞ A fiat stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a specific fiat currency, such as the US dollar. Its stability is achieved by backing each token with an equivalent amount of fiat currency held in reserve by a centralized entity. These digital assets facilitate transactions and provide a stable store of value within the volatile crypto market. They act as a crucial bridge between traditional financial systems and decentralized ones.
Context ∞ Fiat stablecoins are a significant component of the digital asset market, with ongoing discussions about their regulatory status and the transparency of their reserves. News often reports on audits of reserve holdings and governmental pronouncements regarding stablecoin regulation. A critical future development involves clearer global regulatory standards and potential central bank digital currency initiatives that could alter the stablecoin landscape.
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