A token redeemable one-for-one for currency is a promise to pay on demand. That promise is the same one a bank deposit makes, and it attracts the same category of concern.
The promise creates a run risk
Holders treat the token as equivalent to money precisely because they believe redemption will always be honoured immediately.
If that belief weakens, everyone tries to redeem at once, and the issuer must convert reserves into cash faster than any market can absorb.
This is the classic run dynamic, and it does not require the issuer to have done anything wrong. Doubt alone is sufficient to make it self-fulfilling.
Reserve composition determines survivability
Rules therefore concentrate on what backs the token. Cash and very short-dated government paper can be liquidated quickly at predictable prices.
Corporate debt, longer maturities and loans may be worth their face value eventually while being impossible to sell quickly without a loss.
The requirement is not that reserves are large but that they are liquid, since a fully backed issuer can still fail to meet redemptions on time.
Redemption rights have to be enforceable
A promise means little if only large counterparties can exercise it. Some designs restrict direct redemption to institutional partners with minimum sizes.
Retail holders then depend on secondary markets, where the price can drift from par exactly when they most want to exit.
Rules increasingly specify who may redeem, within what period, and at what cost, so the peg rests on a legal right rather than on market confidence.
Segregation and bankruptcy treatment matter most at the end
Reserves held in the issuer's own name are available to its creditors, which would leave holders as unsecured claimants in an insolvency.
Frameworks require reserves to be held in trust or in segregated arrangements so they remain identifiable as belonging to token holders.
This determines outcomes in the one situation the rules exist to address, and it is where the differences between jurisdictions are largest.
Disclosure substitutes for supervision where it is absent
Where a comprehensive framework does not yet apply, issuers publish attestations describing reserve composition at a point in time.
An attestation is narrower than an audit, confirming that stated holdings existed on a date rather than opining on the financial statements as a whole.
The direction of travel is toward full authorisation and supervision, though the requirements differ substantially by jurisdiction and continue to change.