What Is the Significance of the “Quality” of Reserve Assets (E.g. T-Bills Vs. Commercial Paper)?

The quality of reserve assets directly relates to their safety and liquidity, which is crucial for peg maintenance. High-quality assets, such as short-term US Treasury Bills (T-Bills), are considered near-cash, highly liquid, and low-risk.

Lower-quality assets, such as unrated commercial paper or corporate bonds, carry higher credit risk and are less liquid. Holding lower-quality assets increases the risk that the stablecoin issuer cannot meet redemption demands during a run without incurring losses, thus threatening the peg.