"Stablecoins, money market funds and monetary policy"
Together with Massimo Ferrari at the ECB and colleagues at the BIS, we looked at stablecoins, cryptocurrencies that promise to be worth always a dollar on demand and, for this reason, partly similar to money market funds (MMFs). In this study, we show that stablecoins do not act as “safe-haven” against crypto or standard financial shocks and react differently from MMFs. In particular, after a monetary policy tightening, prime-MMF assets rise, whereas stablecoin market capitalization declines, since the crypto market turns bearish and investors demand less stablecoins for speculative purposes. U.S. dollar monetary policy, therefore, is the linchpin that connects crypto and traditional financial markets.