Glossary
Redemption
The process for exchanging a token for the referenced asset or value.
Related guide: Stablecoin Reserves and Depeg Risk. Updated 2026-09-08.
Redemption in context
Redemption concerns a holder's claim against an issuer or arrangement. A sale on an exchange concerns a buyer on that exchange. Follow the counterparty and the settlement process to distinguish the two.
Important boundary
Exchange trading is secondary-market activity, not necessarily issuer redemption.
Selling a token for dollars does not necessarily exercise redemption rights. A secondary-market sale can occur without any change in the issuer's reserves or outstanding token obligations.
Worked example
Two ways to exchange 500 tokens for money
In a fictional arrangement, an eligible holder may redeem 500 tokens for $500, with a $2 processing fee and next-business-day payment. Their net receipt is $498. On an exchange, assume another buyer will immediately buy all 500 tokens at $0.99 each with no fee. That sale returns $495.
The $3 difference is not automatically an available profit. The holder might not meet the issuer's eligibility rules, the exchange quote may change, and the issuer payment arrives later. The two paths deliver different timing and involve different counterparties.
Trace four steps in an actual description: who can submit a request, what happens to the tokens, who owes the payment, and when the payment becomes usable. Sending tokens to a wallet is not proof that this entire process has completed. The example specifies its own terms and does not describe any particular issuer.
Continue in the guide
Reading a reserve claim without stopping at the headline
Read the complete applied scenarioKnowledge check
Check the distinction
If the fictional redemption fee rises to $6, which path returns more money under the same assumptions?
Redemption returns $500 - $6 = $494. The assumed exchange sale returns $495, which is $1 more. This comparison still leaves timing, eligibility, and counterparty differences unresolved.
Source trail
Check the source or calculation
Background on disclosures and redemption rights. The numerical examples on this page are our fictional exercises, not figures reported by the FSB.