Definition ∞ Redemption at par means that an asset, typically a stablecoin or a bond, can be exchanged for its face value or original issue price. For stablecoins, this implies that one unit can always be exchanged for one unit of the pegged fiat currency. This mechanism is crucial for maintaining the stablecoin’s peg and user confidence. It provides a direct conversion option.
Context ∞ Redemption at par is a fundamental mechanism for fiat-backed stablecoins, ensuring their stability and utility in the digital asset ecosystem. News frequently reports on stablecoin issuers’ ability to honor redemptions at par, as any failure can cause a de-peg and significant market disruption. Regulatory proposals often focus on requiring stablecoin issuers to maintain sufficient reserves to guarantee such redemptions. This concept is central to the trustworthiness and operational integrity of stablecoins.
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