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

RePEc Short ID: pla1101
ORCID iD: 0000-0001-5572-8259

Anadu, Kenechukwu E.; Azar, Pablo D.; Cipriani, Marco; Eisenbach, Thomas M.; Huang, Catherine; La Spada, Gabriele; Landoni, Mattia; Macchiavelli, Marco; Malfroy-Camine, Antoine; Wang, J. Christina

Working Paper

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. Our key finding is that, like MMFs, stablecoins also suffer from “flight-to-safety” dynamics. This is manifested in net flows from riskier to safer stablecoins on days of crypto-market stress. The same flight-to-safety dynamics also characterized flows during stablecoin runs, as exemplified by the two most severe episodes in 2022 and 2023. Furthermore, as flight-to-safety flows occur within MMF families, stablecoin flows tend to occur within blockchains.

JEL Classification: G10; G20; G23;