Token Redemption

Token redemption is the process by which a holder hands a token back to its issuer and receives the money or asset that the token represents. It applies to fiat-backed stablecoins, tokenised deposits, tokenised funds and tokens backed by commodities such as gold. When a stablecoin is redeemed, the issuer pays out from its reserves, usually by bank transfer, and removes the token from circulation through stablecoin burning. The holder's legal redemption right is a key test of a token's quality. In the EU, Markets in Crypto-Assets Regulation (MiCA) gives holders of e-money tokens the right to redeem at par value at any time. In practice, many issuers only redeem directly for verified institutional customers above a minimum amount, while retail holders exit by selling on an exchange. This makes market liquidity and the issuer's ability to process large redemptions important during periods of stress. Details are covered under stablecoin redemption.