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Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?

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Abstract

Similar to the more traditional money market funds (MMFs), stablecoins aim to provide investors with safe, money-like assets. We investigate similarities and differences between these two investment products. Our key finding is that, like MMFs, stablecoins also suffer from “flight-to-safety” dynamics. This is manifested in net flows from riskier to safer stablecoins on days of crypto-market stress. The same flight-to-safety dynamics also characterized flows during stablecoin runs, as exemplified by the two most severe episodes in 2022 and 2023. Furthermore, as flight-to-safety flows occur within MMF families, stablecoin flows tend to occur within blockchains.

Suggested Citation

  • Kenechukwu E. Anadu & Pablo D. Azar & Catherine Huang & Marco Cipriani & Thomas M. Eisenbach & Gabriele La Spada & Mattia Landoni & Marco Macchiavelli & Antoine Malfroy-Camine & J. Christina Wang, 2025. "Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?," Supervisory Research and Analysis Working Papers SRA 23-02, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbqu:101131
    Note: First version August 2023
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    More about this item

    Keywords

    money market mutual funds; financial stability; runs; liquidity transformation; crypto assets; stablecoins;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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