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 shortterm US Treasury yields using daily data from 2021 to 2025. Using local projections and an instrumental variable approach that exploits idiosyncratic cryptocurrency market price variation purged of traditional financial market correlations, we find that a 2-standard deviation inflow into stablecoins lowers 3-month Treasury bill yields by 2.5-3.5 basis points (bps), with limited to no spillover effects on other tenors. The price impact is state-dependent: effects are statistically insignificant in periods of ample bill supply but increase to 5-8 bps during periods of bill scarcity, as measured by Federal Reserve reverse repo facility growth and debt ceiling standoffs. Stablecoins' influence on Treasury yields may thus be particularly pronounced during periods of market stress or supply constraints, with implications for monetary policy transmission, stablecoin reserve transparency and financial stability.

Keywords: stablecoins; treasury securities; financial stability; 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-cba, nep-fdg, nep-fmk, nep-ifn, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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