# Peg Stability & Solvency Risk The primary risk for any dollar-denominated on-chain asset is deviation from its intended value. Peg instability can arise not only from outright insolvency, but from **market perception of redemption risk**, delayed settlement, or uncertainty around the collateral backing. Even when collateral is fundamentally sound, short-term dislocations can occur if markets doubt whether redemption will be orderly under stress. #### Why this risk exists in RWAs Unlike crypto-native collateral, real-world assets introduce: * Settlement timelines * Issuer-level redemption mechanics * Legal and operational dependencies These factors can create *temporary uncertainty*, even if the underlying assets are high quality. #### How rwaUSD mitigates this **First, through collateral selection.**\ rwaUSD is intentionally restricted to **highly liquid, near-cash RWAs**, such as short-duration U.S. Treasury instruments and highly liquid tokenized gold. These are assets with deep global markets measured in **trillions of dollars** and observable pricing under stress. **Second, through conservative solvency parameters.**\ Mint-to-value ratios are set meaningfully below 100% (illustratively in the \~70–85% range for liquid assets), ensuring over-collateralization even during adverse price moves. These buffers are calibrated for stress, not normal conditions. **Third, through insurance as a backstop, not a crutch.**\ rwaUSD is designed to incorporate an insurance framework underwritten by **Lloyd’s of London**, intended to cover defined adverse scenarios affecting eligible collateral, including certain de-pegging, operational, or fraud-related events, subject to policy terms. Critically, insurance is treated as **supplemental protection**, not a single point of dependency. rwaUSD remains solvent without insurance; insurance exists to absorb tail risk and reinforce confidence during stress. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.multipli.fi/risks/peg-stability-and-solvency-risk.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.