Stablecoin Assessment Framework

Alejandro Garcia, Bena Lands and Dennis Yanchus

No 2021-6, Discussion Papers from Bank of Canada

Abstract: We outline a three-step framework to investigate stablecoin arrangements and quantitatively assess their risk. The first step is to classify the stablecoin arrangement into three parts—coin structure, transfer system(s) and financial service(s)—and categorize the attributes of each part. The second step is to identify specific risk scenarios. The third is to quantify the range of probable loss and range of possible frequency associated with the identified risk scenarios. Our proposed framework allows authorities to understand the defining characteristics of stablecoin arrangements, to be specific about any concerns they may have, and to be objective in their treatment from issuer to issuer. Additionally, the process we are proposing ensures that authorities and the stablecoin issuer can come to a quantitatively based understanding about the potential risks. The main contributions we make are to separate stablecoins arrangements into three activity-based components and to apply an operational risk management approach to quantifying risks of stablecoins.

Keywords: Digital currencies and fintech; Financial institutions; Financial markets; Financial system regulation and policies; Payment clearing and settlement systems (search for similar items in EconPapers)
JEL-codes: D81 G18 O38 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2021-04
New Economics Papers: this item is included in nep-pay
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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