Stablecoin collateral consists of assets pledged or locked to support the issuance and solvency of a collateralized stablecoin arrangement.
Collateral is especially important in crypto-collateralized stablecoins, where users lock assets in smart contracts before minting stablecoins. Because the collateral can be volatile, these systems commonly require collateral worth more than the stablecoins issued and use liquidation rules when collateral values fall. Some literature uses reserve and collateral terminology loosely for issuer-backed stablecoins. StablecoinBeat should preserve the distinction when the legal and operational structure permits it.
Collateral is generally pledged or locked within a collateralized issuance structure. Reserve assets are generally held within an issuer-backed arrangement to support redemption. Their legal treatment and control can differ.
Collateral quality, volatility, valuation, and liquidation rules affect the capacity of a collateralized stablecoin to remain solvent when asset prices move sharply.
A crypto-collateralized stablecoin can require a user to lock collateral worth more than the value of the stablecoins minted against it.