Regulatory responses to the financial stability implications of stablecoins

Ulrich Bindseil

No 470, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: In essence, the currently large stablecoins are electronic money issued by narrow balance sheet vehicles into a distributed ledger (or a "programmable platform"). Many believe that they will have significant success as a new form of money. Members of the current US administration expect that US stablecoins would circulate globally and support demand for treasuries and the international role of the USD. Related to the latter, recent industry initiatives plan to rely on US stablecoins as a settlement asset for cross-border payments ("stablecoin sandwich"). We discuss the comparative advantages of banks vs. non-banks as stablecoin issuers, as well as between MiCAR compliant and Genius Act compliant coins. We then review the implications of large global stablecoins on the financial system and discuss financial stability risks and remedies. We compare regulatory approaches across some jurisdictions and note that different directions have been taken, although most authorities seem to agree that stablecoins must not be remunerated. We discuss additional ideas how to address the risks associated with successful stablecoins, propose some basic regulatory principles and argue that prohibiting the remuneration of stablecoins does not necessarily foster financial stability. We suggest three options fulfilling the proposed regulatory principles.

Keywords: money; stablecoin; blockchain; narrow banks; financial stability; run; disintermediation (search for similar items in EconPapers)
JEL-codes: E40 E50 F33 G10 G20 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-fdg, nep-mac, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:338085

DOI: 10.2139/ssrn.5710762

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