Backed tokens are still a trust liability with the issuing party. They have a place and are interesting, but it would make sense to limit the scope of exposure.

Yes, that's why there's a spectrum of stable coins with varying levels of centralized control, governance, risk, etc. Stable-ish coins like RAI and LUSD are backed by ETH only, but they do not have a hard peg, they allow for some small wiggle room (typically <10%) that allows the protocols to catch up with dramatic supply/demand imbalances when they occur.

Exactly.

Take Tether for example. Every time BTC starts to dip, USDT starts to de-peg. They are not at all uncoupled. Tether doesn't have the market cap to cash out all of the BTC, and never will. The amount of apparent value in the crypto market heavily outweighs any possibility of cashing it all out.

And that doesn't even begin to touch the questionable liquid assets held by stable coins. Tether claim to be holding 82% of "extremely liquid" assets [1], but I'm unsure it's proven or tested. From the report [2]:

> The valuation of the assets of the Group is based on normal trading conditions and does not reflect unexpected and extraordinary market conditions, or the case of key custodians or counterparties experiencing substantial illiquidity, which may result in delayed realisable values. No provision for expected credit losses was identified by management at the reporting date.

Substantial liquidity could be caused by, say, global inflation or recession conditions. But that surely won't happen...

[1] https://tether.to/en/tether-proves-resilience-of-reserves-in...

[2] https://assets.ctfassets.net/vyse88cgwfbl/1Xfu4398CIoMiuKjPh...