Stablecoins and safe asset prices

Rashad Ahmed and Iñaki Aldasoro

No 1270, BIS Working Papers from Bank for International Settlements

Abstract: This paper examines the impact of dollar-backed stablecoin flows on short-term US Treasury yields using daily data from 2021 to 2025. Estimates from instrumented local projection regressions suggest that a 2-standard deviation inflow into stablecoins lowers 3-month Treasury yields by 2-2.5 basis points within 10 days, with limited to no spillover effects on longer tenors. We also find evidence of asymmetric effects: stablecoin outflows raise yields by two to three times as much as inflows lower them. Decomposing the yield impact by issuer shows that USDT (Tether) has the largest contribution followed by USDC (Circle), consistent with their relative size. Our results highlight stablecoins' growing footprint in safe asset markets, with implications for monetary policy transmission, stablecoin reserve transparency, and financial stability.

Keywords: stablecoins; treasury securities; money market funds; safe assets (search for similar items in EconPapers)
JEL-codes: E42 E43 G12 G23 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-fdg and nep-mon
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