Q. Consider the following statements regarding ‘Stablecoins’: - A stablecoin is typically pegged to an existing government-backed currency.
- Stablecoins function as a bridge between fiat currency and cryptocurrency.
- All stablecoins are always backed only by fiat currencies and no other assets.
Which of the statements given above is/are correct?
Answer:
Only 1 and 2
Notes: Statements 1 and 2 are correct: stablecoins are often pegged to government-backed (fiat) currencies and serve as a bridge between fiat and crypto. Statement 3 is incorrect, as some stablecoins are backed by assets other than fiat, such as gold or cryptocurrencies, or may even be algorithmic with no collateral backing.