
Cryptocurrencies
US Federal Reserve Banks Warn That Stablecoins May Lead to Financial Instability
The Federal Reserve Banks of Boston and New York released a staff report on September 26, which analyzes stablecoins, such as USDT and USDC, in relation to money market funds. Notable findings from the report indicate that both stablecoins and money market funds exhibit similar behaviors during times of financial stress, suggesting that stablecoins may pose a risk of instability to the wider financial system.
The report, titled “Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?,” provides a detailed examination of the actions of investors during the stablecoin runs of 2022 and 2023, comparing these patterns to those observed during the money market fund runs of 2008 and 2020.