 Are stablecoins the money market mutual funds of the future?Nico Oefele, Dirk G. Baur and Lee Smales Journal of Empirical Finance, 2024, vol. 79, issue C Abstract: This paper is the first to provide a comprehensive comparison of two financial instruments: stablecoins and money market mutual funds (MMFs). We observe similar reserve asset backing for fiat reserve backed (FRB) stablecoins and MMFs, similar importance of sponsor support, and the same negative association between macroeconomic indicators and peg deviations. Both instruments serve as short-term facilities for investors to park funds and their primary market microstructure is similar. However, FRB stablecoins exhibit larger dispersions from the dollar peg, significantly higher volatility, and a lack of transparency in their market infrastructure. Larger FRB stablecoins show reduced volatility compared to their smaller counterparts, with peg deviation drivers more closely resembling those of MMFs. We conclude that FRB stablecoins demonstrate remarkable similarities to MMFs and have the potential to become the MMFs of the future. Keywords: Stablecoins; Money market mutual funds; Financial intermediation; Peg deviations; Sponsor support (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:79:y:2024:i:c:s0927539824000914 DOI: 10.1016/j.jempfin.2024.101557 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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