Definition ∞ A USD-backed token is a type of stablecoin whose value is pegged to the United States Dollar. Each token is designed to maintain a stable price, typically 1 USD, by being collateralized with an equivalent amount of USD or highly liquid, USD-denominated assets. These tokens provide stability within the volatile cryptocurrency market. They serve as a digital equivalent to fiat currency.
Context ∞ USD-backed tokens are a critical component of the digital asset market, frequently featured in crypto news due to their role in trading and remittances. Regulatory scrutiny often focuses on the transparency and auditability of the reserves held by issuers to ensure their 1:1 backing. Debates about central bank digital currencies (CBDCs) also intersect with the future of privately issued USD-backed tokens, influencing their long-term market position.
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