Working Paper

An Analytical Price of Stablecoin “Deposit” Insurance

Abstract: With the passage of the GENIUS Act of 2025, stablecoins are poised to play a greater role in the U.S. financial system. Although very similar to bank deposits, stablecoins lack the government guarantees offered for bank deposits in the form of deposit insurance. This paper is the first to analytically derive the price of hypothetical “deposit” insurance for stablecoins. The price of this insurance is shown to be a function of the volatility of the stablecoin’s price (the price of debt), reflecting Merton’s (1977) deposit insurance pricing model. Empirical estimates of the price of stablecoin insurance are developed in a novel way: using the high frequency data on the spot-price of issuer debt that is available for stablecoins, but not for bank deposits.

JEL Classification: G21; G23; G28; G29;

https://doi.org/10.18651/RWP2025-15

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Research Working Paper

Publication Date: 2025-10-17

Number: RWP 25-15