Brandon Joel Tan · 2026 · Working paper · IMF Working Paper WP/26/144, Western Hemisphere Department
A global-games model of how dollar stablecoins affect parallel FX markets under fixed or managed exchange rates: stablecoins both widen access to foreign currency and create a common public price that can coordinate runs, so their welfare effect is state-dependent — beneficial when misalignment is low, destabilising when it is high.
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 synchronises 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.
Richard K. Lyons, Ganesh Viswanath-Natraj · 2023 · Journal article · Journal of International Money and Finance (NBER WP 27136)
Empirical study of the arbitrage mechanism that holds fiat-backed stablecoins near their peg.
Key findings
- Peg deviations are corrected mainly through the primary market (mint/redeem by authorised participants).
- Access to primary-market arbitrage strengthened peg stability over time.
Harald Uhlig · 2022 · Working paper · NBER Working Paper 30256
Post-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.
Adrien d'Avernas, Vincent Maurin, Quentin Vandeweyer · 2022 · Working paper · Working paper (Becker Friedman Institute / SSRN)
Theoretical 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.
Gary B. Gorton, Chase P. Ross, Sharon Y. Ross · 2022 · Working paper · NBER Working Paper 30796
Analyses how leverage and secondary-market liquidity determine whether a stablecoin holds its peg.
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.
Antonio Díaz, Carlos Esparcia, Diego Huélamo · 2022 · Journal article · The North American Journal of Economics and Finance
This paper empirically assessed the ability of three stablecoins to mitigate the downside risk of a traditional cryptocurrency portfolio. The findings indicated that dollar-backed stablecoins are particularly suitable as a hedge for crypto investors.
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.
John M. Griffin, Amin Shams · 2020 · Journal article · The Journal of Finance, Vol. 75(4)
A high-profile empirical study associating Tether (USDT) issuance with support of Bitcoin prices during the 2017 run-up.
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.