IDEAS home Printed from https://ideas.repec.org/a/ecb/ecbmbu/202200182.html
   My bibliography  Save this article

Stablecoins’ role in crypto and beyond: functions, risks and policy

Author

Listed:
  • Adachi, Mitsu
  • Da Silva, Pedro Bento Pereira
  • Born, Alexandra
  • Cappuccio, Massimo
  • Czák-Ludwig, Stephanie
  • Gschossmann, Isabella
  • Pellicani, Antonella
  • Plooij, Mirjam
  • Paula, Georg
  • Philipps, Sarah-Maria

Abstract

Stablecoins are in the spotlight due to their rapid growth, increasing global use cases and potential financial risk contagion channels. This article analyses the role played by stablecoins within the wider crypto-asset ecosystem and finds that some existing stablecoins are already critical to liquidity in crypto-asset markets. This could have wide-ranging implications for crypto-asset markets if a large stablecoin were to fail and could also have contagion effects if crypto-assets’ interlinkages with the traditional financial system continue rising. To date, the speed and cost of stablecoin transactions, as well as their redemption terms and conditions, have fallen short of what is required of practical means of payment in the real economy. Their growth, innovation and increasing use cases, coupled with their potential contagion channels to the financial sector, call for the urgent implementation of effective regulatory, supervisory and oversight frameworks before significant further interconnectedness with the traditional financial system occurs. JEL Classification: E42, G13, G18, G28

Suggested Citation

  • Adachi, Mitsu & Da Silva, Pedro Bento Pereira & Born, Alexandra & Cappuccio, Massimo & Czák-Ludwig, Stephanie & Gschossmann, Isabella & Pellicani, Antonella & Plooij, Mirjam & Paula, Georg & Philipps,, 2022. "Stablecoins’ role in crypto and beyond: functions, risks and policy," Macroprudential Bulletin, European Central Bank, vol. 18.
    • Handle: RePEc:ecb:ecbmbu:2022:0018:2
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/financial-stability/macroprudential-bulletin/html/ecb.mpbu202207_2~836f682ed7.en.html
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Briola, Antonio & Vidal-Tomás, David & Wang, Yuanrong & Aste, Tomaso, 2023. "Anatomy of a Stablecoin’s failure: The Terra-Luna case," Finance Research Letters, Elsevier, vol. 51(C).

    More about this item

    Keywords

    crypto-assets; financial stability risk; means of payment; stablecoins;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbmbu:2022:0018:2. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.