Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?

Kenechukwu Anadu (), Pablo Azar, Catherine Huang, Marco Cipriani, Thomas Eisenbach, Gabriele La Spada, Mattia Landoni, Marco Macchiavelli, Antoine Malfroy-Camine and J. Christina Wang

No 1073, Staff Reports from Federal Reserve Bank of New York

Abstract: Similar to the more traditional money market funds (MMFs), stablecoins aim to provide investors with safe, money-like assets. We investigate similarities and differences between these two investment products. Like MMFs, stablecoins suffer from “flight-to-safety” dynamics: we document net flows from riskier to safer stablecoins on days of crypto-market stress and estimate a discrete “break-the-buck” threshold of $1, below which stablecoin redemptions accelerate. We then focus on two specific stablecoin runs, in 2022 and 2023, showing that the same flight-to-safety dynamics also characterized these episodes. Finally, as flight-to-safety flows occur within MMF families, stablecoin flows tend to happen within blockchains.

Keywords: stablecoins; money market mutual funds; financial stability; Crypto Assets; runs; liquidity transformation (search for similar items in EconPapers)
JEL-codes: G10 G20 G23 (search for similar items in EconPapers)
Pages: 54
Date: 2023-09-01
New Economics Papers: this item is included in nep-ban, nep-mon and nep-pay
Note: Revised April 2024.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? (2024)
Working Paper: Runs and Flights to Safety: Are Stablecoins the New Money Market Funds? (2023)
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DOI: 10.59576/sr.1073

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