Search Results
Working Paper
Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?
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 ...
Working Paper
Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?
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. Like MMFs, stablecoins suffer from “flight-to-safety” dynamics: we document net flows from riskier to safer stablecoins on days of crypto-market stress and estimate a discrete “break-the-buck” threshold of $1, below which stablecoin redemptions accelerate. We then focus on two specific stablecoin runs, in 2022 and 2023, showing that the same flight-to-safety dynamics also ...
Working Paper
Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?
Stablecoins and money market funds both seek to provide investors with safe, money-like assets but are vulnerable to runs in times of stress. In this paper, we investigate similarities and differences between the two, comparing investor behavior during the stablecoin runs of 2022 and 2023 to investor behavior during the money market fund runs of 2008 and 2020. We document that, similar to money market fund investors, stablecoin investors engage in flight-to-safety, with net flows from riskier to safer stablecoins during run periods. However, whereas in money market funds run risk has ...
Working Paper
Runs and Flights to Safety: Are Stablecoins the New Money Market Funds?
Stablecoins and money market funds both seek to provide investors with safe, money-like assets but are vulnerable to runs in times of stress. In this paper, we investigate similarities and differences between the two, comparing investor behavior during the stablecoin runs of 2022 and 2023 to investor behavior during the money market fund runs of 2008 and 2020. We document that, similarly to money market fund investors, stablecoin investors engage in flight to safety, with net flows from riskier to safer stablecoins during run periods. However, whereas in money market funds, run risk has ...
Journal Article
The Financial Stability Implications of Digital Assets
Financial activity associated with digital assets has grown rapidly, raising concerns about financial stability risks. This article presents an overview of these risks, adapting the Federal Reserve’s framework for monitoring financial stability in the traditional financial system. The overview reveals that the observed fragility of digital assets is associated with several financial vulnerabilities: valuation pressures of crypto assets, funding risk in most crypto sectors, the widespread use of leverage, and a highly interconnected crypto ecosystem. However, to date, these vulnerabilities ...
Discussion Paper
The Emergence of Tokenized Investment Funds and Their Use Cases
A blockchain is a distributed database where independent computers across the world maintain identical copies of a transaction record, updating it only when the network reaches consensus on new transactions—making the history transparent and extraordinarily difficult to alter. Historically, bonds have traded almost entirely in over-the-counter (OTC) markets, while equities and money market fund shares have largely settled through centralized infrastructures such as stock exchanges and central securities depositories. In both settings, each institution maintains its own records, and ...
Discussion Paper
The Financial Stability Implications of Tokenized Investment Funds
In a previous post, we provided background information about the emergence of tokenized investment funds and their use cases. These use cases are currently limited to the digital asset ecosystem. However, the recent approval of cryptocurrency exchange-traded funds (ETFs) and the passage of the GENIUS Act raise concerns about the impact of these tokenized investment fund to the broader financial system. In this post, we assess this impact by considering three economic mechanisms based in part on market participants’ investment strategies and liquidity needs. They include: liquidity ...
Discussion Paper
Synthetic Stablecoins and Financial Stability
On October 10, 2025, the announcement of a potential additional 100 percent tariff on Chinese goods drove risk-off moves across equities, Treasuries, credit spreads, and digital assets. Digital asset prices fell sharply, trading volumes surged, and liquidity vanished from key exchanges. In this post, we show how the price shock in digital assets was transmitted and amplified through a class of instruments called synthetic stablecoins—crypto assets whose structural design turned an external shock into a self-reinforcing deleveraging spiral within the crypto ecosystem.
Discussion Paper
Stablecoins and (Non)Crypto Shocks: A 2026 Update
Stablecoins are digital assets whose value is pegged to that of a fiat currency, typically the U.S. dollar at a peg of $1.00 per token. In a previous blog post, we described the rapid growth of stablecoins through early 2025, highlighted changes in stablecoins’ reserve-asset composition, and examined their reactions to Bitcoin price shocks. In this post, we document the growth of stablecoins since our last post. Then, we examine how shocks from outside the crypto industry can impact the composition of stablecoins’ reserve assets. For our case study, we use the 2023 failure of Silicon ...
Discussion Paper
Endogenous Supply Chains, Productivity, and COVID-19
During the COVID-19 pandemic, many industries adapted to new social distancing guidelines by adopting new technologies, providing protective equipment for their employees, and digitizing their methods of production. These changes in industries’ supply chains, together with monetary and fiscal stimulus, contributed to dampening the economic impact of COVID-19 over time. In this post, I discuss a new framework that analyzes how changes in supply chains can drive economic growth in the long run and mitigate recessions in the short run.