Contagious Stablecoins?
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Author / Producer
Date
2025
Publication Type
Conference Paper
ETH Bibliography
yes
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Abstract
Can competing stablecoins produce efficient and stable outcomes? We study competition among stablecoins pegged to a stable currency. Stablecoins are backed by interest-bearing safe assets and can be redeemed with the issuer or traded in a secondary market. If an issuer sticks to an appropriate investment and redemption rule, its stablecoin is invulnerable to runs. Since an issuer must pay interest on its stablecoin if other issuers also pay interest, competing interest-bearing stablecoins, however, are contagious and can render the economy inefficient and unstable. The efficient allocation is uniquely implemented when regulation prevents interest payments on stablecoins.
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Publication status
published
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Journal / series
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Pages / Article No.
Publisher
The Econometric Society
Event
13th World Congress of the Econometric Society (ESWC 2025)
Edition / version
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Software
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Date collected
Date created
Subject
Stablecoins; Currency competition; Free banking; Private money; Digital money
Organisational unit
03729 - Gersbach, Hans / Gersbach, Hans
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
06338 - KOF FB KOF Lab / KOF FB KOF Lab
Notes
Conference lecture held on August 18, 2025.