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What Is the Counterparty Risk in Centralized Stablecoins Compared to Decentralized Ones?

Centralized stablecoins have human counterparty risk (trust in the issuer); decentralized stablecoins have smart contract and systemic market risk.
Greeks.Live21.11.25

What Is the Counterparty Risk in Centralized Stablecoins Compared to Decentralized Ones?

Centralized stablecoins carry high counterparty risk, as users must trust the issuing entity holds the promised reserves and will honor redemptions. This is a risk of fraud or mismanagement.

Decentralized stablecoins shift this risk to the smart contract and the underlying collateral's volatility and protocol design. While they remove human counterparty risk, they introduce smart contract risk and systemic market risk.

How Do Algorithmic Stablecoins Differ from Collateralized Ones, and What Is Their Impact on Systemic Risk?
How Does On-Chain Transparency Enhance the Security of a Decentralized Stablecoin?
How Do Central Bank Digital Currencies (CBDCs) Compare to Stablecoins for DVP?
How Can Decentralized Exchanges (DEXs) Impact Altcoin Liquidity Compared to Centralized Exchanges (CEXs)?

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