Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?

Kenechukwu Anadu (), Pablo D. Azar, Catherine Huang, Marco Cipriani, Thomas Eisenbach, Gabriele La Spada, Mattia Landoni, Marco Macchiavelli, Antoine Malfroy-Camine and J. Christina Wang
Additional contact information
Pablo D. Azar: https://www.newyorkfed.org/research/economists/azar
Marco Cipriani: https://www.newyorkfed.org/research/economists/cipriani
Gabriele La Spada: https://www.newyorkfed.org/research/economists/laspada

No SRA 23-02, Supervisory Research and Analysis Working Papers from Federal Reserve Bank of Boston

Abstract: Similar to the more traditional money market funds (MMFs), stablecoins aim to provide investors with safe, money-like assets. We investigate similarities and differences between these two investment products. Like MMFs, stablecoins suffer from “flight-to-safety” dynamics: we document net flows from riskier to safer stablecoins on days of crypto-market stress and estimate a discrete “break-the-buck” threshold of $1, below which stablecoin redemptions accelerate. We then focus on two specific stablecoin runs, in 2022 and 2023, showing that the same flight-to-safety dynamics also characterized these episodes. Finally, as flight-to-safety flows occur within MMF families, stablecoin flows tend to happen within blockchain.

Keywords: stablecoins; money market mutual funds; financial stability; crypto assets; runs; liquidity transformation (search for similar items in EconPapers)
JEL-codes: G10 G20 G23 (search for similar items in EconPapers)
Pages: 55
Date: 2023-08-24, Revised 2024-03-26
New Economics Papers: this item is included in nep-mon and nep-pay
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Related works:
Working Paper: Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? (2023)
Working Paper: Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? (2023)
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