Runs on Stablecoins

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 20230712, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Stablecoins are digital assets whose value is pegged to that of fiat currencies, usually the U.S. dollar, with a typical exchange rate of one dollar per unit. Their market capitalization has grown exponentially over the last couple of years, from $5 billion in 2019 to around $180 billion in 2022. Notwithstanding their name, however, stablecoins can be very unstable: between May 1 and May 16, 2022, there was a run on stablecoins, with their circulation decreasing by 15.58 billion and their market capitalization dropping by $25.63 billion (see charts below.) In this post, we describe the different types of stablecoins and how they keep their peg, compare them with money market funds—a similar but much older and more regulated financial product, and discuss the stablecoin run of May 2022.

Keywords: cryptocurrency; stablecoins; money market mutual funds (MMF); fire sale; currency (search for similar items in EconPapers)
JEL-codes: E42 (search for similar items in EconPapers)
Date: 2023-07-12
New Economics Papers: this item is included in nep-ban, nep-mon and nep-pay
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