Why Do Decentralized Stablecoins Typically Have a Higher Capital-to-Asset Ratio than Centralized Banks?

Decentralized stablecoins have a higher capital-to-asset ratio (over-collateralization) because they operate without a central authority, lender of last resort (like a central bank), or deposit insurance. They must rely solely on on-chain mechanisms to ensure solvency.

The high ratio provides a necessary, transparent, and immutable buffer against the high volatility of their crypto collateral, which a centralized bank, with access to fiat liquidity and regulatory support, does not require.