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Design & Economics

Fiat-backed vs crypto-backed vs algorithmic designs, reserves and seigniorage.

9 of 33 indexed papers · the whole library

Paper Venue Year
A Luna-tic Stablecoin Crash Harald UhligPost-mortem of the May 2022 Terra/UST algorithmic-stablecoin collapse.
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
Can Stablecoins Be Stable? Adrien d'Avernas, Vincent Maurin, Quentin VandeweyerTheoretical analysis of whether fiat-backed stablecoins can remain stable without deposit insurance or a lender of last resort.
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
Stablecoins: Growth Potential and Impact on Banking Gordon Y. Liao, John CaramichaelFed staff analysis of how stablecoin growth could affect bank funding and credit, depending on reserve design.
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 SettlementsThe BIS's vision of a future monetary system, assessing stablecoins and crypto against a central-bank-money core.
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
Regulating Libra Dirk A. Zetzsche, Ross P. Buckley, Douglas W. ArnerLegal analysis of the regulatory challenges posed by Libra/Diem-style global stablecoins.
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
Some Simple Economics of Stablecoins Christian Catalini, Alonso de Gortari, Nihar ShahEconomic framework for how stablecoins maintain value and the trade-offs across reserve designs.
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. ZhangArgues stablecoins recreate the instability of the 19th-century 'wildcat' free-banking era and proposes regulating issuers like banks or issuing a CBDC.
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
Stablecoins: risks, potential and regulation Douglas Arner, Raphael Auer, Jon FrostA foundational BIS framework classifying stablecoins by design and reserve model and mapping their risks to regulatory options.
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 PinnaECB taxonomy of stablecoins by stabilization mechanism, assessing whether each can deliver price stability.
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
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