Public information and stablecoin runs

Rashad Ahmed, Iñaki Aldasoro and Chanelle Duley

No 1164, BIS Working Papers from Bank for International Settlements

Abstract: We show that the informational quality of stablecoin (SC) issuers' reserve assets affects the type of coordination game being played among SC holders and its equilibria. When the volatility of reserve assets is unknown, par convertibility is resilient to small shocks but fails with large negative public shocks to reserve asset values, even if they are initially high. Public information disclosure increases (reduces) run risk for sufficiently low (high) holders' priors about reserve quality. Transparency and quality of reserve assets have distinct effects on issuer failure risk. Our results point to a trade-off between peg stability and issuer fragility.

Keywords: stablecoins; crypto; global games; bank runs (search for similar items in EconPapers)
JEL-codes: C70 D83 D84 E42 G01 G20 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-ban, nep-gth, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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