The most popular stablecoin type, majority fiat-backed stablecoins, dominates global crypto markets and accounts for more than 85% of the $313 billion supply. Variations in the reserves of majority fiat-backed stablecoins stem from differences in their respective business strategies, regulatory authority, and risk appetite. Nearly all majority fiat-backed stablecoin issuers use qualified custodians for their fiat reserve assets, including Treasuries and cash equivalents. The majority fiat-backed ecosystem depends heavily on regulated and trusted centralized entities, including issuers, custodians, financial institutions, and oracles, with strong performance track records.
In Part One of ARK’s four-part guide to stablecoins, we introduced stablecoins and contextualized their development. I argued that the design of each type of stablecoin includes tradeoffs. Peg stability is generally strong but vulnerable to exogenous shocks like exchange outages and liquidity crunches, as demonstrated by USDC’s brief depeg on Binance during the 10null10 event. The GENIUS Act cements majority fiat-backed stablecoins as the only eligible US payment stablecoins, positioning them for strong growth as financial and tech incumbents enter the market.
The majority fiat-backed stablecoins dominate the global crypto markets, accounting for more than 85% of the $313 billion supply. Differences in reserve compositions stem from each issuer’s business strategy, regulatory oversight, and risk appetite. Nearly all fiat-backed issuers rely on qualified custodians for fiat reserves, including Treasuries and cash equivalents. The ecosystem depends heavily on regulated centralized entities, such as issuers, custodians, financial institutions, and oracles, with strong performance histories.
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