CFA Level I · CFA Level I Exam · Introduction to Digital Assets
Which feature of a stablecoin backed by reserves is most likely to be the primary source of risk for its holders?
The quality and availability of the reserve assets is the main risk. A reserve-backed stablecoin keeps its peg only if reserves are sufficient, liquid and redeemable, so weak or inaccessible reserves can break the peg and cause losses to holders.
- AQuality and availability of the reserve assetsCorrect
- BNumber of nodes validating transactions
- CSpeed at which new blocks are created
Explanation
A reserve-backed stablecoin maintains its peg through reserve assets, so holders depend on their quality, liquidity and redeemability. Node counts and block speed relate to network operation, not the peg.
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