Stablecoin Glossary
Redemption
Redemption is the process through which a holder with access to the redemption mechanism exchanges stablecoins for the assets or value specified by the arrangement, typically at or near the target value.
Explanation
In centrally issued fiat-backed stablecoins, redemption normally removes tokens from circulation and returns fiat value to an eligible customer under the issuer's terms. Protocol-based stablecoins can use different redemption or conversion mechanisms. Direct redemption access may be restricted by eligibility rules, minimum transaction sizes, jurisdiction, compliance requirements, or the structure of the arrangement. A secondary-market holder can therefore have economic exposure to a redemption promise without having direct access to the issuer's redemption window.
Why it matters
Credible redemption at the target value is a major channel through which reserve-backed stablecoins support par trading. Constraints on redemption can weaken arbitrage and increase reliance on secondary-market liquidity.
Example
An eligible customer may return 1 million units of a dollar stablecoin to the issuer, receive the corresponding fiat proceeds under the issuer's terms, and have the redeemed tokens removed from circulation.
Related terms
Last reviewed: September 2026