Working Paper Revision

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


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. Like MMFs, stablecoins suffer from “flight-to-safety” dynamics: we document net flows from riskier to safer stablecoins on days of crypto-market stress and estimate a discrete “break-the-buck” threshold of $1, below which stablecoin redemptions accelerate. We then focus on two specific stablecoin runs, in 2022 and 2023, showing that the same flight-to-safety dynamics also characterized these episodes. Finally, as flight-to-safety flows occur within MMF families, stablecoin flows tend to happen within blockchain.

Keywords: stablecoins; money market mutual funds; financial stability; crypto assets; runs; liquidity transformation;

JEL Classification: G10; G20; G23;

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Bibliographic Information

Provider: Federal Reserve Bank of Boston

Part of Series: Supervisory Research and Analysis Working Papers

Publication Date: 2024-03-26

Number: SRA 23-02

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