Issuer-backed stablecoins are created and destroyed through minting and redemption. Eligible customers may deliver money to receive tokens or return tokens to receive the reference asset, subject to the issuer’s terms.
Redemption supports market arbitrage
When direct redemption works reliably, traders may buy tokens below the target or sell newly issued tokens above it. That activity can help move secondary-market prices toward the reference value.
Issuer redemption and exchange trading are different markets
A stablecoin can trade on exchanges even when a holder cannot redeem directly with the issuer. Secondary-market liquidity then determines the price available to that holder.
Not every holder has direct issuer access
Minimum amounts, identity checks, banking hours, jurisdiction rules, fees, or account eligibility can limit direct redemption. Many users therefore depend on exchanges and market liquidity instead.
Reserves must be available when redemptions arrive
Nominal asset value is not the only concern. The issuer also needs operational access and sufficient liquidity to meet eligible redemption requests.
Sources
Educational information, not investment advice.