Definition ∞ A Full Reserve Model in finance mandates that an institution holds all of its liabilities in liquid reserves. Applied to digital assets, this means that for every stablecoin or token issued, an equivalent amount of the underlying asset, such as fiat currency or another cryptocurrency, is held in reserve. This model aims to provide maximum stability and redeemability for the digital asset.
Context ∞ The full reserve model is a critical discussion point for stablecoins, especially after events highlighting the risks of fractional reserve or algorithmic stablecoins. News often examines stablecoin issuers’ reserve attestations and audits to verify adherence to a full reserve policy. Regulatory bodies are increasingly advocating for full reserve requirements to bolster confidence and lessen systemic risks in the digital asset market.
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