Checking a stablecoin

A stablecoin check has two halves. One half is on the ledger and anyone can read it. The other half is on paper, in what the issuer publishes.

On the ledger

1. Is it the right issuer? Go to the issuer's own website. Find the address it publishes. Compare it, character by character, with the issuer of the token in your wallet.
2. What can the issuer do to my balance? Some issuers can freeze your tokens. Some can take them back. Some must approve you before you can hold any. The switches for all of this are public.
3. Does it charge a transfer fee? If so, you send a little extra each time you pay someone.

On paper

1. What backs it? Cash, bonds, something else?
2. Who checks? Is there an outside firm, and how often does it report?
3. Can I redeem? Who is allowed to swap tokens for dollars, and on what terms?

Freeze and clawback are not signs of a bad token. Issuers use them to follow the law, enforce holds and respond to fraud or lost keys. They are still powers over your balance, so know which ones apply before you hold much.

Nothing here tells you a token is safe. It tells you who you are trusting and what they can do.

How issuers set up. xrpl.org recommends three kinds of account:

• An issuing address, the cold wallet, that mints the token.
• Standby addresses, warm wallets, run by trusted staff.
• Operational addresses, hot wallets, for automated day-to-day payments.

So tokens often reach users from an operational address. The issuer on the token is still the issuing address.

Issuer settings to read with account_info:

Rules that help reading them:

• Clawback can be enabled only on an account with an empty owner directory, before it issues anything.
• No Freeze and clawback exclude each other. Setting one while the other is set fails with tecNO_PERMISSION.
• A transfer fee applies to every token the address issues. The fee amount is burned, which lowers what the issuer owes.

Supply. gateway_balances on the issuing address returns obligations: the total of each trust line token issued. Pass operational addresses as hotwallet to list their holdings separately. Some public servers disable this method. It does not cover MPTs.

Fixed supply. An issuer can send all tokens to a distribution account and then blackhole the issuing account. No more can be issued after that. A stablecoin that takes deposits cannot work this way.

Stablecoins as MPTs. An MPT issuance can label itself in metadata with asset class rwa and subclass stablecoin. The label is the issuer's claim. Lock and clawback powers show in the issuance flags instead of account flags.

Related: Checking a token, Check before you hold, Multi-Purpose Tokens.