Stablecoins’ role in crypto and beyond: functions, risks and policy

Mitsu Adachi, Pedro Bento Pereira Da Silva, Alexandra Born, Massimo Cappuccio, Stephanie Czák-Ludwig, Isabella Gschossmann, Antonella Pellicani, Sarah-Maria Philipps, Mirjam Plooij, Ines Rossteuscher and Pierfrancesco Zeoli

Macroprudential Bulletin, 2022, vol. 18

Abstract: Stablecoins are in the spotlight due to their rapid growth, increasing global use cases and potential financial risk contagion channels. This article analyses the role played by stablecoins within the wider crypto-asset ecosystem and finds that some existing stablecoins are already critical to liquidity in crypto-asset markets. This could have wide-ranging implications for crypto-asset markets if a large stablecoin were to fail and could also have contagion effects if crypto-assets’ interlinkages with the traditional financial system continue rising. To date, the speed and cost of stablecoin transactions, as well as their redemption terms and conditions, have fallen short of what is required of practical means of payment in the real economy. Their growth, innovation and increasing use cases, coupled with their potential contagion channels to the financial sector, call for the urgent implementation of effective regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs. JEL Classification: E42, G13, G18, G28

Keywords: crypto-assets; financial stability risk; means of payment; stablecoins (search for similar items in EconPapers)
Date: 2022-07
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.ecb.europa.eu//press/financial-stabili ... 2~836f682ed7.en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbmbu:2022:0018:2

Access Statistics for this article

More articles in Macroprudential Bulletin from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().