What does a "102% reserves" report show?
Stablecoin issuers publish reserve reports monthly or quarterly. A figure like "reserves of 102% of tokens issued" is reassuring, but real stability depends on what those reserves consist of and how quickly they can be turned into cash.
This guide sets out an order for reading a reserve report: asset composition and custodians, the difference between disclosure and independent verification, and a liquidity check against heavy redemptions, using a hypothetical reserve table. It also covers checking report dates and the issuer's jurisdiction.
The promise reserves support
The core promise of a fiat-reserve stablecoin is redemption: bring one token, receive one dollar. Reserves exist to keep that promise, so the key question is not their total but whether they can produce cash on time when redemption requests surge.
The Financial Stability Board's 2023 recommendations for global stablecoin arrangements call for reserves held in high-quality, highly liquid assets, clear redemption rights for holders, and transparent disclosure of reserve composition and redemption terms. Those three tests are a good framework for any report.
A hypothetical reserve report
The table shows reserves for a hypothetical stablecoin with $10 billion in circulation.
| Asset | Share | Time to cash | Main risks |
|---|---|---|---|
| Bank deposits | 10% | Same day | Bank credit risk, balances above deposit insurance |
| Treasury bills (3 months or less) | 70% | 1–2 days (sale or maturity) | Small losses in a fire sale |
| Treasury-backed repo | 15% | 1 day to 1 week | Counterparty risk |
| Other (corporate debt, crypto, etc.) | 5% | Uncertain | Price swings, hard to sell |
About 95% can be turned into cash within a week, which looks sufficient for normal redemption demand. But losses on the "other" 5% could cut the 102% ratio to 97%.
Disclosure versus independent verification
Check what kind of report it is. An attestation by an accounting firm confirms balances on a particular date but does not examine internal controls or what happened between reports. Its depth differs from a broader audit.
The gap between the report's reference date and its publication date also matters. A month-end report published mid-month leaves two weeks of unknown changes. The BIS has noted that the scope and frequency of stablecoin disclosures vary widely between issuers, making comparison difficult.
Redemption rights under stress
As a hypothetical example, suppose redemption requests for $2 billion, 20% of tokens issued, arrive within a week. In the table, bank deposits ($1 billion) and repo ($1.5 billion) cover most of it, and selling some Treasury bills covers the rest. That calculation gives a sense of whether the coin could withstand a run.
The calculation breaks down if the deposits sit at one or two banks and one of them fails. And if only institutions above a minimum size can redeem directly, ordinary holders may have no choice but to sell on exchanges at a discount. Ethereum.org's stablecoin overview also notes that risks differ according to how a stablecoin is issued and backed.
Common misreadings
"Reserves above 100% mean it is safe" skips over quality and liquidity. Reserves above 100% can still fail a run if much of them is hard to sell quickly.
"The issuer is audited" also needs checking. Point-in-time attestations of balances are frequently mistaken for full audits.
"All Treasury bills are equally liquid" is another trap. Bills maturing next week and bills maturing in three months both count as short-term, but in a hurry the longer ones may have to be sold before maturity, at whatever price the market offers that day.
Dates and jurisdiction
Work through these steps when reading a stablecoin reserve report.
- Note the report's reference date, publication date, who prepared it, and whether it is an attestation or an audit.
- Record each asset type's share and maturity, and the names and spread of banks and custodians.
- Calculate the share convertible to cash within a week and check it against redemptions of 10% to 20% of supply.
- Read the terms for who can redeem, minimum amounts, fees, and processing times.
- Identify which jurisdiction regulates the issuer and what obligations it places on reserve composition and disclosure.
Limits of reserve analysis
A reserve report is a snapshot. It reveals little about operational risk, legal disputes, or freezing powers, and even accurate figures do not settle how well holders' legal claims on the reserves are protected, which depends on jurisdiction.
The reserve mix and redemption scenario here are hypothetical. When assessing a real stablecoin, use the issuer's latest report and regulators' publications with their dates, and look at liquidity and redemption terms before the headline reserve ratio.