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Stablecoin Disintermediation
We propose a theory of stablecoin disintermediation, whereby stablecoins not only erode banks’ deposit franchises but also transmit liquidity stress to the banking system. Using transaction-level data linking on-chain transactions to wholesale interbank payments, we document the first evidence of liquidity-driven bank disintermediation. Stablecoins directly transmit liquidity shocks to the banking system: banks with stablecoin deposits experience substantial increases in payment demand and heightened liquidity exposure to daily stablecoin primary market activity. Consistent with theory, ...