Stablecoins: Adoption and Fragility

Christoph Bertsch

No 423, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: This paper develops a payment-centric model of stablecoin runs with endogenous consumer adoption and seller acceptance, making the issuer’s liability composition an equilibrium outcome. Stablecoin fragility arises endogenously from shifts in the composition of the holder base as adoption expands across transactional environments. Broader adoption attracts users who derive lower transactional value from holding stablecoins, increasing the aggregate propensity to run and generating a destabilizing run externality that individual adoption decisions do not internalize. In addition, sellers’ multi-homing choices create uninternalized network effects that erode the transaction value of bank deposits. By linking adoption dynamics to issuer fragility, the model provides theoretical foundations for regulatory concerns about excessive stablecoin adoption and delivers novel testable implications. The analysis further shows that seigniorage and congestion effects can mitigate run risk, whereas issuer moral hazard can amplify fragility, even in the presence of regulatory disclosure.

Keywords: Money; payment preferences; financial stability; financial regulation (search for similar items in EconPapers)
JEL-codes: D83 E40 G01 G28 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2023-05-01, Revised 2025-12-01
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-mon and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.riksbank.se/globalassets/media/rapport ... on-and-fragility.pdf Full text (application/pdf)

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:hhs:rbnkwp:0423

Access Statistics for this paper

More papers in Working Paper Series from Sveriges Riksbank (Central Bank of Sweden) Sveriges Riksbank, SE-103 37 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Lena Löfgren ().