Stablecoins and central bank digital currency

Three ways to see it

1. 1

   A stablecoin is a token whose price tracks a reference asset, usually the US dollar. The big three by circulating supply are Tether's USDT, Circle's USDC, and PayPal's PYUSD. Each is fiat-backed: the issuer holds a portfolio of cash, US Treasury bills, and short reverse repos, and promises to redeem one token for one dollar. Reserve composition, attestation cadence, and bankruptcy remoteness vary widely between issuers and are the single most important risk axis. Algorithmic stablecoins, which tried to maintain the peg without reserves, collapsed catastrophically in 2022 with TerraUSD and remain a cautionary tale.

2. 2

   Way one: read the attestation. USDC publishes monthly attestation reports from a top-tier accountant detailing reserve composition by instrument and maturity. USDT publishes quarterly reports with less granular breakdown and a longer history of doubt over collateral quality. PYUSD, governed under New York DFS rules, publishes monthly and faces direct prudential supervision. The price of a stablecoin can deviate in stress; in March 2023, USDC briefly traded at 0.88 dollars after Silicon Valley Bank failed, because a portion of its reserves was stuck there. The peg held within 36 hours, but the lesson is permanent: reserve concentration is reserve risk.

3. 3

   Way two: imagine a PKR-pegged stablecoin under PVARA. A licensed issuer would hold rupee reserves at scheduled banks, publish daily or weekly attestations, and accept redemption requests through a regulated wallet ecosystem. The use cases include diaspora remittances that arrive directly in PKR, domestic merchant payments without card-rail interchange, and B2B settlement between Pakistani SMEs. The risks include reserve runs, peg stress during devaluation episodes, and inadvertent dollarisation if the PKR coin is bypassed in favour of USDC. Under the ordinance, capital floors reported in press coverage have been in the order of one billion rupees for fiat-referenced token issuers, subject to confirmation against the gazette text.

The why-tree

Try this with Claude

AI-edge prompt to try: 'Compare USDC reserve disclosures (BlackRock-managed Circle Reserve Fund) against a hypothetical PKR stablecoin reserve attestation under PVARA. Produce a table with instrument type, custodian, attestation cadence, audit firm, and bankruptcy remoteness. Flag two structural gaps Pakistan should close.' Verify all factual statements before quoting.