Reserve composition is the mix and relative share of asset types held in a stablecoin's reserve portfolio.
A reserve can contain cash deposits, Treasury bills, reverse repurchase agreements, other government securities, commercial instruments, or additional assets permitted by the arrangement. Composition determines the reserve's exposure to credit, market, liquidity, duration, concentration, and currency risk. Two stablecoins with the same nominal reserve value can therefore have different risk profiles because their reserves contain different assets or maturities.
Reserve size measures how much backing is held. Reserve composition describes what the backing consists of and how the portfolio is allocated.
Reserve composition affects how readily an issuer can generate cash for redemptions and how sensitive the reserve is to market stress.
A reserve invested mostly in overnight cash and short-term government securities has a different liquidity and duration profile from one holding longer-dated or lower-quality assets.