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Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time. Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin.