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Stablecoins, money market funds and monetary policy

Author

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

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.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000400
    DOI: 10.1016/j.econlet.2025.112203
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    More about this item

    Keywords

    Stablecoins; Crypto; Bitcoin; Monetary policy shocks; Money market funds;
    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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