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Stablecoins, money market funds and monetary policy

Author

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  • Aldasoro, Iñaki
  • Ferrari Minesso, Massimo
  • Gambacorta, Leonardo
  • Habib, Maurizio Michael
  • Cornelli, Giulio

Abstract

Using a new series of crypto shocks, we document that money market funds’ (MMF) assets under management, and traditional financial market variables more broadly, do not react to crypto shocks, whereas stablecoin market capitalization does. U.S. monetary policy shocks, in contrast, drive developments in both crypto and traditional markets. Crucially, the reaction of MMF assets and stablecoin market capitalization to monetary policy shocks is different: while prime-MMF assets rise after a monetary policy tightening, stablecoin market capitalization declines. In assessing the state of the stablecoin market, the risk-taking environment as dictated by monetary policy is much more consequential than flight-to-quality dynamics observed within stablecoins and MMFs. JEL Classification: E50, F30

Suggested Citation

  • Aldasoro, Iñaki & Ferrari Minesso, Massimo & Gambacorta, Leonardo & Habib, Maurizio Michael & Cornelli, Giulio, 2024. "Stablecoins, money market funds and monetary policy," Working Paper Series 2987, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20242987
    Note: 334027
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    References listed on IDEAS

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    1. 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).
    2. Rashad Ahmed & Iñaki Aldasoro, 2025. "Stablecoins and safe asset prices," BIS Working Papers 1270, Bank for International Settlements.

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    More about this item

    Keywords

    Bitcoin; crypto; monetary policy shocks; money market funds; stablecoins;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F30 - International Economics - - International Finance - - - General

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