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On par: a money view of stablecoins

Author

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  • Iñaki Aldasoro
  • Perry Mehrling
  • Daniel H. Neilson

Abstract

This paper presents a money view analysis of the recent crypto innovation of stablecoins, which have seen a remarkable rise as well as some spectacular collapses. By analogizing on-chain with offshore, and developing an extended analogy of stablecoins with Eurodollars, we reveal the primitive character of the existing on-chain liquidity mechanisms that support the promise of par settlement by existing on-chain stablecoin models. Liquidity, not solvency, is the issue confronted by par settlement.

Suggested Citation

  • Iñaki Aldasoro & Perry Mehrling & Daniel H. Neilson, . "On par: a money view of stablecoins," Journal of Financial Market Infrastructures, Journal of Financial Market Infrastructures.
    • Handle: RePEc:rsk:journ7:7960145
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    References listed on IDEAS

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    1. Claudio Borio & Robert Neil McCauley & Patrick McGuire & Vladyslav Sushko, 2016. "Covered interest parity lost: understanding the cross-currency basis," BIS Quarterly Review, Bank for International Settlements, September.
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    7. Stefan Avdjiev & Egemen Eren & Patrick McGuire, 2020. "Dollar funding costs during the Covid-19 crisis through the lens of the FX swap market," BIS Bulletins 1, Bank for International Settlements.
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    Cited by:

    1. Joebges, Heike & Herr, Hansjörg & Kellermann, Christian, 2024. "Crypto assets as a threat to financial market stability," IPE Working Papers 233/2024, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. 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).
    3. Suchánek Marián, 2024. "Not all money is created equal: The concept of a hierarchy of money," Review of Economic Perspectives, Sciendo, vol. 24(2-3), pages 57-74.
    4. Philippe Bergault & Louis Bertucci & David Bouba & Olivier Gu'eant & Julien Guilbert, 2024. "Automated Market Making: the case of Pegged Assets," Papers 2411.08145, arXiv.org.
    5. Rashad Ahmed & Iñaki Aldasoro & Chanelle Duley, 2024. "Public information and stablecoin runs," BIS Working Papers 1164, Bank for International Settlements.

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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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