IDEAS home Printed from https://ideas.repec.org/p/imk/studie/100-2025.html

Stablecoins and the Future of Money: Economic Principles and Policy Implications

Author

Listed:
  • Peter Bofinger

Abstract

The paper discusses the functions and the potential of stablecoins as an innovative payment system: Stablecoins constitute a new payment object which can be used for a direct exchange on the infrastructures provided by blockchains and crypto exchanges. For the discussion of stablecoins It is important to distinguish between bond-based and bank-based stablecoins: While the former use bank deposits as collateral, the latter use short-term treasuries. Bond-based stablecoins have an attractive business model. They enable direct international.payments, i.e. without an intermediary, based on a safe transaction asset. Market dynamics reveal significant network effects: the system is characterized by the US dollar as the dominant currency denomination, a duopoly of two issuers, and a small number of blockchains. In the last few years, the dominant issuers have demonstrated resilience even during periods of economic shocks. The macroeconomic effects of bank-based stablecoins are limited, since they cannot create loans. However, bond-based stablecoins can create money by purchasing government bonds. While bank-based stablecoins create financial stability risks by interconnecting banks and stablecoin issuers, bond-based stablecoins do not present this risk. The Digital Euro is not an alternative to stablecoins: Its use is limited to the euro area, it is designed for retail payments and it only allows asset holdings for private households.

Suggested Citation

  • Peter Bofinger, 2025. "Stablecoins and the Future of Money: Economic Principles and Policy Implications," IMK Studies 100-2025, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:studie:100-2025
    as

    Download full text from publisher

    File URL: http://www.boeckler.de/pdf/p_imk_study_100_2025.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Milton Friedman, 1959. "The Demand for Money: Some Theoretical and Empirical Results," NBER Chapters, in: The Demand for Money: Some Theoretical and Empirical Results, pages 1-29, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    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. George S. Tavlas, 2015. "In Old Chicago: Simons, Friedman, and the Development of Monetary‐Policy Rules," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(1), pages 99-121, February.
    2. Mishkin, Frederic S, 1982. "Does Anticipated Monetary Policy Matter? An Econometric Investigation," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 22-51, February.
    3. Sumera Arshad & Amajd Ali, 2016. "Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 5(4), pages 193-209, December.
    4. Carlo Campajola & Marco D'Errico & Claudio J. Tessone, 2022. "MicroVelocity: rethinking the Velocity of Money for digital currencies," Papers 2201.13416, arXiv.org, revised May 2023.
    5. PREM S. LAUMAS & MARTIN WILLlAMS, 1983. "Household Demand for Money in an Underdeveloped Economy. A Case Study of India," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 22(1), pages 37-46.
    6. Graves, Philip E., 1979. "Relative Risk Aversion: Increasing or Decreasing?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(2), pages 205-214, June.
    7. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777, March.
    8. Dilip B. Madan & King Wang, 2024. "On the real rate of interest in a closed economy," Annals of Finance, Springer, vol. 20(4), pages 459-477, December.
    9. Bordo, Michael D. & Jonung, Lars, 1990. "The long-run behavior of velocity: The institutional approach revisited," Journal of Policy Modeling, Elsevier, vol. 12(2), pages 165-197.
    10. Joel Fried, 1973. "Money, Exchange And Growth," Economic Inquiry, Western Economic Association International, vol. 11(3), pages 285-301, September.
    11. Gordon, Robert J, 1984. "The Short-run Demand for Money: A Reconsideration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(4), pages 403-434, November.
    12. Jorge Iván González, 2004. "La dicotomía micro-macro no es pertinente," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 6(11), pages 73-95, July-Dece.
    13. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611, March.
    14. Han Gao & Mariano Kulish & Juan Pablo Nicolini, 2020. "Two Illustrations of the Quantity Theory of Money Reloaded," Working Papers 774, Federal Reserve Bank of Minneapolis.
    15. Brent Berry, 2008. "Financial Transfers from Living Parents to Adult Children: Who Is Helped and Why?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 67(2), pages 207-239, April.
    16. John C. Goveia & Prem S. Laumas, 1975. "Permanent Income Hypothesis and the Cyclical Behavior of Velocity," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 111(II), pages 191-204, June.
    17. Willem H. Buiter, 2003. "James Tobin: An Appreciation of his Contribution to Economics," Economic Journal, Royal Economic Society, vol. 113(491), pages 585-631, November.
    18. Pierre Maurice, 1964. "Note sur la théorie monétaire de Milton Friedman," Revue Économique, Programme National Persée, vol. 15(5), pages 677-712.
    19. Olajide O. Oyadeyi, 2025. "The Velocity of Money and Lessons for Monetary Policy in Nigeria: An Application of the Quantile ARDL Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8249-8285, June.
    20. Benchimol, Jonathan, 2015. "Money in the production function: A New Keynesian DSGE perspective," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 82(1), pages 152-184.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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:imk:studie:100-2025. 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: Sabine Nemitz (email available below). General contact details of provider: https://edirc.repec.org/data/imkhbde.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.