People trade a stablecoin on exchanges at a price near one dollar. That price depends on an issuer who can create tokens when demand rises and destroy them when holders want dollars back.
The issuer keeps the cash in a bank or fund and writes a matching token balance. Burning the token pays that cash back. U.S. and European Union rules set who may issue the token.
What problem does stablecoin issuance solve?
A bank deposit and a blockchain balance are separate records. Issuance creates the token after the issuer accepts the reserve asset. Redemption destroys the token when the issuer returns that asset.
Exchange trades move tokens that already exist from one holder to another. Minting and burning change how many tokens are outstanding.
Circle Mint is Circle’s service for institutions such as exchanges, banks, and wallet firms. It mints USDC or EURC against a fiat deposit and redeems those tokens at 1 to 1 with that currency.
Tether states that its tokens are pegged 1 to 1 with a matching fiat currency and backed by reserves. The issuer decides who may use that window. That window is where supply changes.
What actually happens when a stablecoin is minted or redeemed?
A Circle Mint customer wires fiat from a linked bank account. Circle credits the Mint account with the same number of USDC or EURC. The customer then sends those tokens to a blockchain address.
Domestic wire deposits, including Fedwire, settle the same business day when they arrive before the cutoff. Real-time rails such as RTP can settle in seconds where Circle supports them. International SWIFT wires take 1 to 3 business days.
Redemption reverses those steps. The customer requests a payout, Circle debits the stablecoin balance, and Circle sends fiat to the linked bank.
Circle states that payouts typically settle on the next business day. A wire the bank returns is credited back to the Mint account.
An exchange that wires $10 million receives 10 million USDC after the wire settles. It can then move that USDC to its own wallet. If it later redeems 4 million USDC, Circle wires $4 million back, and 6 million USDC stays outstanding.
Other systems mint tokens against crypto collateral instead of a bank deposit. A user locks an asset such as ether in a smart contract, and the contract mints stablecoins up to a limit set by that collateral. Returning the stablecoins and any fee the contract charges unlocks the collateral.
Secondary prices use that same window. If USDC trades at $1.01, a Mint customer can pay $1.00, receive 1 USDC, and sell it on the exchange, which adds supply. If USDC trades at $0.99, buying it and redeeming at $1.00 removes supply.
The price moves toward $1.00 while the issuer still accepts the redemption. A mint can show up onchain in seconds. The fiat side still follows the bank rail.
Where the money, risk, and data move
The dollars stay off the chain. Circle says the USDC reserve is held apart from its operating funds. Most of it sits in the Circle Reserve Fund, an SEC-registered government money market fund managed by BlackRock.
That fund can hold cash, short-dated U.S. Treasuries, and overnight Treasury repurchase agreements. The rest of the reserve is cash at banks. Circle says a Big Four firm provides monthly assurance, under AICPA attestation standards, that reserve value covers USDC in circulation.
Circle’s August 31, 2026 examination report listed 73,320,757,305 USDC in circulation and reserve assets at a fair value of $73,398,532,613. Reported fair value exceeded that circulation count by $77,775,308.
The Circle Reserve Fund held $49,584,000,000 of Treasury repurchase agreements. Other accounts held $9,591,096,978 of cash at regulated financial institutions.
Tether’s reserve includes assets beyond cash and short Treasuries. Tether’s Q2 2026 attestation, prepared by BDO, gives management’s figures as of June 30, 2026.
Assets were $187,751,426,411. Liabilities were $183,641,897,215, and $183,622,105,630 of that related to digital tokens issued. Assets exceeded liabilities by $4,109,529,196.
Tether said most reserves were U.S. government-backed instruments. It reported more than 146 tons of physical gold and a cut of about $2.38 billion in secured lending. Tether said a Big Four audit was still underway, separate from the BDO attestation.
The onchain ledger records the tokens. The August 31 USDC report still shows cash moving for settlement timing, so a token can exist before a wire is final. How reserves are held and segregated decides whether other creditors can claim those assets.
The GENIUS Act, Public Law 119-27, was enacted on July 18, 2025. A permitted U.S. payment stablecoin issuer must hold identifiable reserves of at least 1 to 1.
Allowed assets include currency, demand deposits at an insured bank, and Treasuries with 93 days or less remaining. They also include specified overnight repurchase agreements and government money market funds that hold only those assets.
Congress set the start as the earlier of January 18, 2027, or 120 days after primary federal regulators issue final rules. On September 24, 2026, the Federal Reserve was still requesting comment on proposed reserve, capital, and application rules.
EU Regulation 2023/1114 treats a token that references one official currency as an e-money token. Article 48, in ESMA’s rulebook, bars a public offer in the Union unless the issuer is authorized as a credit institution or an electronic money institution.
The issuer must also have notified a crypto-asset white paper. For asset-referenced tokens, Article 36 requires a segregated reserve at least equal to holder claims, and an independent audit of that reserve every six months.
On April 4, 2025, the SEC staff statement said some dollar tokens are not securities under that staff view. Those tokens, called Covered Stablecoins, are redeemable 1 for 1 for dollars from a liquid reserve.
A Commission interpretation dated March 17, 2026, effective March 23, 2026, took the same view. Payment stablecoins from permitted issuers fall outside the definition of a security after the GENIUS Act takes effect. Yield-bearing and algorithmic designs sit outside that staff note.
The cash stays with banks and funds. The token balance stays on the chain. Each statute sets who may mint inside its own territory.
What it costs and where it leaks
The issuer keeps interest earned on the reserve. The stated redemption amount is the token’s face value. The March 2026 SEC interpretation says the GENIUS Act bars a permitted issuer from paying yield solely because someone holds the token.
The GENIUS Act also requires permitted issuers to disclose redemption fees in plain language. Those fees can change only after at least 7 days’ notice. Wire charges and institutional minimums are further costs of the primary window.
A sale at $0.99 on an exchange is a different price from a $1.00 primary redemption. That one-cent gap is the cost of leaving through the market. What causes a stablecoin to lose its peg is that gap when redemptions are slow, limited, or refused.
What can break or delay the process
Banking hours set the pace. Circle gives same-day treatment only to domestic wires that arrive before the cutoff. International wires take 1 to 3 business days, and payouts typically settle the next business day.
Until the wire finishes, the onchain balance and the bank balance differ. Redemption stops if the issuer’s bank will not send the wire, even when the reserve assets still exist. Exchange prices can then fall below the stated redemption price.
The dollar leg runs through how stablecoin systems use banks. The dollar moves when the bank sends the wire.
Mint authority is a separate failure. The party that can instruct a mint can create tokens. Tokens created without a matching reserve reduce other holders’ claims on the same assets.
Reserve reports and multi-signature controls still depend on the issuer’s keys and on the report matching the accounts. Collateralized mints fail when the locked asset falls faster than the contract can sell it.
As of the Federal Reserve’s September 24, 2026 proposals, that Board rulemaking was still open. Issuers were operating under their existing licenses and bank partners. In the Union, an e-money token issuer must be a credit institution or an electronic money institution.
The onchain mint is the fast step. It breaks when the wire, the reserve report, or the redemption window does not match that balance.
