IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/1270.html

Stablecoins and safe asset prices

Author

Listed:
  • Rashad Ahmed
  • Iñaki Aldasoro

Abstract

This paper examines the impact of dollar-backed stablecoin flows on shortterm US Treasury yields using daily data from 2021 to 2025. Using local projections and an instrumental variable approach that exploits idiosyncratic cryptocurrency market price variation purged of traditional financial market correlations, we find that a 2-standard deviation inflow into stablecoins lowers 3-month Treasury bill yields by 2.5-3.5 basis points (bps), with limited to no spillover effects on other tenors. The price impact is state-dependent: effects are statistically insignificant in periods of ample bill supply but increase to 5-8 bps during periods of bill scarcity, as measured by Federal Reserve reverse repo facility growth and debt ceiling standoffs. Stablecoins' influence on Treasury yields may thus be particularly pronounced during periods of market stress or supply constraints, with implications for monetary policy transmission, stablecoin reserve transparency and financial stability.

Suggested Citation

  • Rashad Ahmed & Iñaki Aldasoro, 2025. "Stablecoins and safe asset prices," BIS Working Papers 1270, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1270
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/work1270.pdf
    File Function: Full PDF document
    Download Restriction: no
    File URL: https://www.bis.org/publ/work1270.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2012. "The Aggregate Demand for Treasury Debt," Journal of Political Economy, University of Chicago Press, vol. 120(2), pages 233-267.
    2. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 42(2 (Fall)), pages 215-287.
    3. Bullmann, Dirk & Klemm, Jonas & Pinna, Andrea, 2019. "In search for stability in crypto-assets: are stablecoins the solution?," Occasional Paper Series 230, European Central Bank.
    4. D’Amico, Stefania & King, Thomas B., 2013. "Flow and stock effects of large-scale treasury purchases: Evidence on the importance of local supply," Journal of Financial Economics, Elsevier, vol. 108(2), pages 425-448.
    5. Iñaki Aldasoro & Sebastian Doerr, 2023. "Who borrows from money market funds?," BIS Quarterly Review, Bank for International Settlements, December.
    6. Aldasoro, Iñaki & Cornelli, Giulio & Ferrari Minesso, Massimo & Gambacorta, Leonardo & Habib, Maurizio Michael, 2025. "Stablecoins, money market funds and monetary policy," Economics Letters, Elsevier, vol. 247(C).
    7. John M. Griffin & Amin Shams, 2020. "Is Bitcoin Really Untethered?," Journal of Finance, American Finance Association, vol. 75(4), pages 1913-1964, August.
    8. Sebastian Doerr & Egemen Eren & Semyon Malamud, 2023. "Money Market Funds and the Pricing of Near-Money Assets," Swiss Finance Institute Research Paper Series 23-04, Swiss Finance Institute.
    9. Robin Greenwood & Samuel G. Hanson & Jeremy C. Stein, 2015. "A Comparative-Advantage Approach to Government Debt Maturity," Journal of Finance, American Finance Association, vol. 70(4), pages 1683-1722, August.
    10. Anneke Kosse & Marc Glowka & Ilaria Mattei & Tara Rice, 2023. "Will the real stablecoin please stand up?," BIS Papers, Bank for International Settlements, number 141, May.
    11. Lyons, Richard K. & Viswanath-Natraj, Ganesh, 2023. "What keeps stablecoins stable?," Journal of International Money and Finance, Elsevier, vol. 131(C).
    12. Ahmed, Rashad & Rebucci, Alessandro, 2024. "Dollar reserves and U.S. yields: Identifying the price impact of official flows," Journal of International Economics, Elsevier, vol. 152(C).
    13. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
    14. Hui Zou & Trevor Hastie, 2005. "Addendum: Regularization and variable selection via the elastic net," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 67(5), pages 768-768, November.
    15. Gary B. Gorton & Elizabeth C. Klee & Chase P. Ross & Sharon Y. Ross & Alexandros P. Vardoulakis, 2022. "Leverage and Stablecoin Pegs," NBER Working Papers 30796, National Bureau of Economic Research, Inc.
    16. Adrien D'Avernas & Quentin Vandeweyer, 2024. "Treasury Bill Shortages and the Pricing of Short‐Term Assets," Journal of Finance, American Finance Association, vol. 79(6), pages 4083-4141, December.
    17. Hui Zou & Trevor Hastie, 2005. "Regularization and variable selection via the elastic net," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 67(2), pages 301-320, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Flôres Junior, Renato Galvão, 2025. "Outlining a monetary system in turbulent times," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 849, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ferrari Minesso, Massimo & Siena, Daniele, 2026. "Private money and public debt. U.S. Stablecoins and the global safe asset channel," Working Paper Series 3174, European Central Bank.
    2. Jason Allen & Jakub Kastl & Milena Wittwer, 2020. "Maturity Composition and the Demand for Government Debt," Staff Working Papers 20-29, Bank of Canada.
    3. Hartley, Jonathan S. & Jermann, Urban J., 2024. "The pricing of U.S. Treasury floating rate notes," Journal of Financial Economics, Elsevier, vol. 155(C).
    4. Dionysopoulos, Lambis & Urquhart, Andrew, 2024. "10 years of stablecoins: Their impact, what we know, and future research directions," Economics Letters, Elsevier, vol. 244(C).
    5. Kathi Schlepper & Heiko Hofer & Ryan Riordan & Andreas Schrimpf, 2017. "Scarcity effects of QE: A transaction-level analysis in the Bund market," BIS Working Papers 625, Bank for International Settlements.
    6. Alan S. Blinder, 2014. "Federal Reserve Policy Before, During, and After the Fall," Book Chapters, in: Martin Neil Baily & John B. Taylor (ed.), Across the Great Divide: New Perspectives on the Financial Crisis, chapter 5, Hoover Institution, Stanford University.
    7. Valentin Haddad & David Sraer, 2020. "The Banking View of Bond Risk Premia," Journal of Finance, American Finance Association, vol. 75(5), pages 2465-2502, October.
    8. Hess Chung & Etienne Gagnon & Taisuke Nakata & Matthias Paustian & Bernd Schlusche & James Trevino & Diego Vilán & Wei Zheng, 2020. "Monetary Policy Options at the Effective Lower Bound: Assessing the Federal Reserve’s Current Policy Toolkit," CARF F-Series CARF-F-483, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    9. Jeff W. Huther & Jane E. Ihrig & Elizabeth C. Klee, 2017. "The Federal Reserve's Portfolio and its Effect on Interest Rates," Finance and Economics Discussion Series 2017-075, Board of Governors of the Federal Reserve System (U.S.).
    10. Christoph Trebesch & Jeromin Zettelmeyer, 2018. "ECB Interventions in Distressed Sovereign Debt Markets: The Case of Greek Bonds," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(2), pages 287-332, June.
    11. Beetsma, Roel & Giuliodori, Massimo & de Jong, Frank & Widijanto, Daniel, 2016. "Price effects of sovereign debt auctions in the euro-zone: The role of the crisis," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 30-53.
    12. Aldasoro, Iñaki & Cornelli, Giulio & Ferrari Minesso, Massimo & Gambacorta, Leonardo & Habib, Maurizio Michael, 2025. "Stablecoins, money market funds and monetary policy," Economics Letters, Elsevier, vol. 247(C).
    13. He, Zhiguo & Nagel, Stefan & Song, Zhaogang, 2022. "Treasury inconvenience yields during the COVID-19 crisis," Journal of Financial Economics, Elsevier, vol. 143(1), pages 57-79.
    14. Yuriy Gorodnichenko & Walker Ray, 2017. "The Effects of Quantitative Easing: Taking a Cue from Treasury Auctions," NBER Working Papers 24122, National Bureau of Economic Research, Inc.
    15. Simon Gilchrist & Egon Zakrajšek, 2013. "The Impact of the Federal Reserve's Large‐Scale Asset Purchase Programs on Corporate Credit Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 29-57, December.
    16. Laséen, Stefan, 2023. "Central bank asset purchases: Insights from quantitative easing auctions of government bonds," Working Paper Series 419, Sveriges Riksbank (Central Bank of Sweden).
    17. Jens H. E. Christensen & Signe Krogstrup, 2022. "A Portfolio Model of Quantitative Easing," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 12(04), pages 1-39, December.
    18. Tischbirek, Andreas, 2018. "Large-scale bond purchases in a currency union with segmentation in the market for government debt," Journal of Economic Dynamics and Control, Elsevier, vol. 95(C), pages 37-69.
    19. Michael E. Cahill & Stefania D'Amico & Canlin Li & John S. Sears, 2013. "Duration risk versus local supply channel in Treasury yields: evidence from the Federal Reserve's asset purchase announcements," Finance and Economics Discussion Series 2013-35, Board of Governors of the Federal Reserve System (U.S.).
    20. Gnewuch, Matthias, 2022. "Spillover effects of sovereign debt-based quantitative easing in the euro area," European Economic Review, Elsevier, vol. 145(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bis:biswps:1270. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.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.