> You trust your stablecoin's issuer that they hold enough fiat in reserve to match the coin? You might as well trust your bank

stablecoin issuers are for all intents and purposes banks.

they'll try very hard to stop anyone from calling them that, but in essence, they give you a note (a crypto coin, in this case) in exchange for a promise that they'll give you back the amount of fiat printed on the note. this is the primary purpose of a bank.