Anchoring trust in money: innovation beyond stablecoins
Bank for International Settlements
Key findings
- Stablecoins operate without the institutional underpinnings — central bank backing, guaranteed par redeemability, and an elastic supply of liquidity — that give money its singleness.
- Stablecoins on permissionless chains, with pseudonymity and unhosted wallets, create AML/CFT and financial-integrity gaps and regulatory-arbitrage risk.
- Fragmentation across multiple blockchain networks undermines the interoperability and network effects needed for money-like functionality.
- Modeling suggests the net macroeconomic effect of widespread stablecoin adoption is modest, but reserve composition matters: government-bill holdings pose different financial-stability risks than bank deposits or central bank reserves.
- In emerging markets, foreign-currency stablecoin adoption threatens monetary sovereignty and can erode the domestic currency's unit-of-account role if substitution deepens from store-of-value into transaction settlement.
- The recommended path is to integrate tokenization into the regulated two-tier system via 'unified ledgers' hosting tokenized central bank reserves, commercial bank deposits, and other supervised private monies.
|
BIS Annual Economic Report 2026, Chapter III |
2026 |
Stablecoins and Fragility in Fixed Exchange Rate Regimes
Brandon Joel Tan
Key findings
- Under rationed foreign currency, the true degree of exchange-rate misalignment is unobserved; traditional parallel markets reveal it only imperfectly because information is dispersed across private bilateral trades.
- Stablecoins both widen access to dollar-like claims outside the official allocation system and create a visible, high-frequency common price that aggregates order flow in one venue.
- In the model, stablecoin market depth determines the precision of a common public signal about misalignment — producing a state-dependent welfare effect.
- When misalignment is low, access and allocation gains dominate and stablecoins raise welfare.
- When misalignment is high, a more precise public price compresses belief dispersion and synchronizes exit, so a coordination externality can trigger runs and overturn the access benefit.
- This supports a state-contingent policy: preserve low-cost access in normal states, but use temporary, targeted measures to manage large or run-like flows when misalignment is high.
|
IMF Working Paper WP/26/144, Western Hemisphere Department |
2026 |
Essays in International Finance
Julian Fernandez Mejia
Key findings
- Exchange rates influence trade dynamics and the vulnerability of economies to external shocks.
- Stablecoins are designed to streamline transactions and overcome volatility constraints of traditional exchange rates.
- The research reveals the sensitivity of both traditional and electronic currencies to external and internal factors.
|
None Top-tier journal |
2024 |
High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements
Financial Stability Board
Key findings
- Sets 'same activity, same risk, same regulation' as the guiding principle for stablecoins.
- Requires robust governance, redemption rights, and reserve/stabilization safeguards for GSCs.
|
Financial Stability Board |
2023 |
Regulation (EU) 2023/1114 on Markets in Crypto-Assets (MiCA)
European Parliament and Council of the European Union
Key findings
- Classifies fiat-pegged stablecoins as e-money tokens (EMTs) and multi-asset/other pegs as asset-referenced tokens (ARTs).
- Requires issuer authorization, adequately backed reserves, and redemption at par for holders.
- Imposes usage/transaction caps on large non-euro tokens used widely as a means of exchange.
|
Official Journal of the European Union |
2023 |
Regulatory regime for systemic payment systems using stablecoins and related service providers
Bank of England
Key findings
- Systemic payment stablecoins should be backed by deposits at the central bank (or equivalent high-quality assets).
- Proposes holding limits during a transition to manage financial-stability risks.
|
Bank of England Discussion Paper |
2023 |
Silicon Valley Bank bankruptcy and Stablecoins stability
Luca Galati, Francesco Capalbo
Key findings
- Evidence of contagion across major stablecoins and Bitcoin was found.
- Substantial abnormal movements in stablecoin cumulative returns and volumes were observed.
- There was a 'flight to safety' from less to more authoritative and trusted stablecoins.
|
International Review of Financial Analysis |
2023 |
What Keeps Stablecoins Stable?
Richard K. Lyons, Ganesh Viswanath-Natraj
Key findings
- Peg deviations are corrected mainly through the primary market (mint/redeem by authorized participants).
- Access to primary-market arbitrage strengthened peg stability over time.
|
Journal of International Money and Finance (NBER WP 27136) Top-tier journal |
2023 |
A Luna-tic Stablecoin Crash
Harald Uhlig
Key findings
- Models the UST depeg as a run driven by loss of confidence rather than purely mechanical failure.
- Highlights the fragility of algorithmic stablecoins lacking hard collateral.
|
NBER Working Paper 30256 |
2022 |
Application of the Principles for Financial Market Infrastructures to stablecoin arrangements
CPMI, IOSCO
Key findings
- Systemic stablecoin arrangements are expected to observe the Principles for Financial Market Infrastructures.
- Emphasises settlement finality, governance and comprehensive risk management.
|
CPMI-IOSCO (BIS) |
2022 |
Can Stablecoins Be Stable?
Adrien d'Avernas, Vincent Maurin, Quentin Vandeweyer
Key findings
- Stablecoins are exposed to runs absent a backstop; par stability is not guaranteed by full reserves alone.
- Explores conditions (fees, redemption design) under which a peg can survive stress.
|
Working paper (Becker Friedman Institute / SSRN) |
2022 |
Cryptocurrencies and Decentralized Finance (DeFi)
Igor Makarov, Antoinette Schoar
Key findings
- Stablecoins are the primary settlement and collateral asset across crypto and DeFi.
- DeFi remains highly interconnected and reliant on a few large stablecoins.
|
Brookings Papers on Economic Activity (NBER WP 30006) Top-tier journal |
2022 |
Leverage and Stablecoin Pegs
Gary B. Gorton, Chase P. Ross, Sharon Y. Ross
Key findings
- A stablecoin holds its peg when arbitrageurs can profitably trade it back to par; deep liquidity is key.
- Leverage built on stablecoins can amplify depeg dynamics.
|
NBER Working Paper 30796 |
2022 |
Stablecoins as a tool to mitigate the downside risk of cryptocurrency portfolios
Antonio Díaz, Carlos Esparcia, Diego Huélamo
Key findings
- Dollar-backed stablecoins have low conditional correlations with cryptocurrency portfolios.
- All stablecoins considered have high diversification capacities by systematically reducing portfolio tail risk.
|
The North American Journal of Economics and Finance |
2022 |
Stablecoins' role in crypto and beyond: functions, risks and policy
European Central Bank
Key findings
- Largest stablecoins are used mainly for crypto trading, settlement and DeFi rather than real-economy payments.
- Reserve opacity and redemption terms are key risks warranting regulation.
|
ECB Macroprudential Bulletin, Issue 18 |
2022 |
Stablecoins: Growth Potential and Impact on Banking
Gordon Y. Liao, John Caramichael
Key findings
- Stablecoins backed by commercial-bank deposits or Treasuries have very different effects on credit intermediation.
- A two-tiered / narrow-bank reserve model can preserve credit while supporting stablecoin growth.
|
Federal Reserve International Finance Discussion Papers No. 1334 |
2022 |
The future monetary system
Bank for International Settlements
Key findings
- Argues stablecoins piggyback on the credibility of central-bank money and can fragment the monetary system.
- Positions CBDCs and tokenized central-bank money as the preferred foundation.
|
BIS Annual Economic Report 2022, Chapter III |
2022 |
The instability of stablecoins
Kun Duan, Andrew Urquhart
Key findings
- There is strong evidence of instability of stablecoins.
- Deviations from the $1 mark are gradually corrected at different speeds for all stablecoins except for DAI.
- DAI's deviations do not converge in the long-run due to non-stationarity.
- BUSD is the most stable stablecoin with the fastest correction speed.
|
Finance research letters |
2022 |
DeFi risks and the decentralisation illusion
Sirio Aramonte, Wenqian Huang, Andreas Schrimpf
Key findings
- DeFi exhibits a 'decentralization illusion': governance and infrastructure remain concentrated.
- Stablecoins are a key channel linking DeFi to the traditional financial system.
|
BIS Quarterly Review, December 2021 |
2021 |
How stable are stablecoins?
Lai T. Hoang, Dirk G. Baur
Key findings
- There is strong evidence of excess price variations in stablecoins.
- Stablecoin returns, volatility, and volumes are highly correlated with Bitcoin time-series.
- Stablecoins increase the trading volume of Bitcoin.
|
European Journal of Finance Top-tier journal |
2021 |
On the stability of stablecoins
Klaus Grobys, Juha-Pekka Junttila, James W. Kolari, Niranjan Sapkota
Key findings
- Bitcoin volatility is well-behaved in a statistical sense with a finite theoretical variance.
- The volatilities of stablecoins are statistically unstable and respond to Bitcoin volatility.
- Lagged Bitcoin volatility exhibits Granger-causal effects on the volatilities of stablecoins.
|
Journal of Empirical Finance Top-tier journal |
2021 |
Regulating Libra
Dirk A. Zetzsche, Ross P. Buckley, Douglas W. Arner
Key findings
- A global multi-currency stablecoin raises novel cross-border regulatory-perimeter questions.
- Recommends coordinated, function-based regulation across jurisdictions.
|
Oxford Journal of Legal Studies Top-tier journal |
2021 |
Report on Stablecoins
President's Working Group on Financial Markets, FDIC, OCC
Key findings
- Recommends Congress require payment-stablecoin issuers to be insured depository institutions.
- Identifies run risk, payment-system risk, and systemic risk / concentration of economic power as the principal concerns.
- Set the template for subsequent US stablecoin legislation.
|
U.S. Department of the Treasury |
2021 |
Some Simple Economics of Stablecoins
Christian Catalini, Alonso de Gortari, Nihar Shah
Key findings
- Frames stablecoin stability as a function of reserve quality, redemption guarantees and market structure.
- Fully-reserved designs trade capital efficiency for credibility.
|
SSRN / Annual Review of Financial Economics |
2021 |
Taming Wildcat Stablecoins
Gary B. Gorton, Jeffery Y. Zhang
Key findings
- Privately produced money that does not trade at par 'no-questions-asked' is inherently run-prone, mirroring pre-1863 wildcat banking.
- Recommends either bringing stablecoin issuers under bank-style regulation and insurance, or introducing a central bank digital currency.
- Frames stablecoins as a monetary-stability question, not merely a consumer-protection one.
|
SSRN Working Paper; later University of Chicago Law Review Top-tier journal |
2021 |
Tethered, or Untethered? On the interplay between stablecoins and major cryptoassets
Ladislav Krištoufek
Key findings
- There is no evidence of stablecoins boosting the prices of other cryptoassets.
- Increased stablecoin issuances react to price changes in other cryptoassets.
|
Finance research letters |
2021 |
Is Bitcoin Really Untethered?
John M. Griffin, Amin Shams
Key findings
- Finds patterns consistent with Tether being issued and used to support Bitcoin prices during downturns in 2017.
- Raises questions about whether issuance was fully backed by reserves.
- Became foundational to concerns about stablecoin reserve transparency and market impact.
|
The Journal of Finance, Vol. 75(4) Top-tier journal |
2020 |
Stablecoins 2.0
Ariah Klages‐Mundt, Dominik Harz, Lewis Gudgeon, Junyou Liu, Andreea Minca
Key findings
- Stablecoins have varying risks according to their design.
- A model framework unifies existing models from economics and computer science.
- Unique risks in non-custodial stablecoins emerge.
|
None |
2020 |
Stablecoins: risks, potential and regulation
Douglas Arner, Raphael Auer, Jon Frost
Key findings
- Stablecoins span a spectrum from fully reserved tokenized funds to fractional and algorithmic designs, with materially different risk profiles.
- Regulation should follow a 'same risk, same regulation' principle rather than treating all stablecoins alike.
- Global stablecoins raise cross-border, monetary-sovereignty and financial-stability concerns beyond any single jurisdiction.
|
BIS Working Papers No. 905 |
2020 |
In search for stability in crypto-assets: are stablecoins the solution?
Dirk Bullmann, Jonas Klemm, Andrea Pinna
Key findings
- Classifies stablecoins into tokenized funds, off-chain and on-chain collateralized, and algorithmic types.
- Argues stability depends on the credibility of the stabilization mechanism and its governance.
|
ECB Occasional Paper No. 230 |
2019 |
Investigating the impact of global stablecoins
G7 Working Group on Stablecoins
Key findings
- Global stablecoins could pose risks to monetary sovereignty, financial stability and fair competition.
- No global stablecoin should launch until legal, regulatory and oversight challenges are addressed.
|
Committee on Payments and Market Infrastructures (BIS) |
2019 |
The Rise of Digital Money
Tobias Adrian, Tommaso Mancini-Griffoli
Key findings
- Proposes a taxonomy distinguishing e-money/stablecoins from bank deposits and central-bank money.
- Adoption of e-money could be rapid via network effects and erode bank deposit funding (disintermediation).
- Coins the risk of 'digital dollarization' in economies with weak currencies.
|
IMF FinTech Note No. 19/01 |
2019 |
What is Stablecoin?: A Survey on Price Stabilization Mechanisms for Decentralized Payment Systems
Makiko Mita, Kensuke Ito, Shohei Ohsawa, Hideyuki Tanaka
Key findings
- Stablecoins are cryptocurrencies with price stabilization mechanisms to match the price of another currency with lower volatility.
- The methods are divided into four collateral types: fiat, crypto, commodity, and non-collateralized.
- Non-collateralized stablecoin on the application layer is the simplest approach for implementation.
|
2019 8th International Congress on Advanced Applied Informatics (IIAI-AAI) |
2019 |