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Discussion Paper
Central Banks and Digital Currencies
Recent developments in payments technology raise important questions about the role of central banks either in providing a digital currency themselves or in supporting the development of digital currencies by private actors, as some authors of this post have discussed in a recent IMF blog post. In this post, we consider two ways a central bank could choose to become involved with digital currencies and discuss some implications of these potential choices.
Briefing
Why Stablecoins Fail: An Economist’s Post-Mortem on Terra
Why do some stablecoins, such as Terra's UST, fail but others do not? Was Terra just an unlucky victim of a classic bank run or speculative attack? Or was its high-yield deposit offering doomed to fail like a Ponzi scheme? What is the limit of the stablecoin's algorithm? What makes payment stable? In this article, we'll dive into potential answers to these questions about the failed stablecoin.
Journal Article
A Method for Estimating the Price of Stablecoin Insurance
As crypto assets such as stablecoins have gained traction in recent years, they have also raised financial stability concerns. The attention has likely been motivated by a steady stream of stablecoin collapses, which are essentially bank runs. One approach to mitigating this risk could be to insure stablecoins in a way similar to bank deposits—that is, with a third-party guarantee to cover the depositor’s (or coin-holder’s) losses should the bank (or issuer) collapse. Because stablecoins have many functional similarities to bank deposits, the theory underlying deposit insurance pricing ...