The kinds of collateralised stablecoin
- Fiat-backed: reserves in bank deposits and short-dated government debt, held by the issuer
- Crypto-collateralised: other crypto-assets locked in smart contracts, worth more than the tokens issued
- Commodity-backed: gold or another commodity held in a vault
A crypto-collateralised design needs no issuer with a bank account. A user locks collateral in a smart contract and creates stablecoins against it, up to a set ratio. If the collateral's price falls below that ratio, the contract sells it automatically to repay the debt, a liquidation.
Over-collateralisation is the buffer against price falls, and it makes the design hungry for capital: more value is locked than is created.
How MiCA classifies a collateralised stablecoin
In the EU the collateral does not decide the category: what the token references does. A token that purports to keep a stable value by referencing one official currency is an e-money token, and one that references another value or right, or a combination, is an asset-referenced token.
Recital 41 of MiCA says those rules apply irrespective of the mechanism that keeps the value stable. Recital 22 adds that a crypto-asset with no identifiable issuer falls outside the titles on issuing, a point that matters for fully decentralised designs.
Why the backing matters to a payment product
A product that accepts or pays out a stablecoin carries the token's risk for as long as it holds a balance. The questions are what the collateral is, who holds it, who can redeem and how fast.
Collateralised or algorithmic?
- Algorithmic stablecoin
- Relies on supply adjustments and arbitrage against a companion token, with little or no outside collateral.
- Fiat-backed stablecoin
- The most common collateralised kind, and the one EU law treats as an e-money token when it references a single official currency.
Where a collateralised stablecoin shows up in a platform
Modules that do the work
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
- CheckoutA hosted checkout for cards, wallets, bank payments and crypto, routed to the best provider.
- FXCurrency conversion with live rates, your margins and the liquidity provider you choose.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.