Template-Type: ReDIF-Paper 1.0
Author-Name: Rashad Ahmed
Author-X-Name-First: Rashad
Author-X-Name-Last: Ahmed
Author-Name: Iñaki Aldasoro
Author-X-Name-First: Iñaki
Author-X-Name-Last: Aldasoro
Author-Name: Chanelle Duley
Author-X-Name-First: Chanelle
Author-X-Name-Last: Duley
Title: Public information and stablecoin runs
Abstract: We show that the informational quality of stablecoin (SC) issuers' reserve assets affects the type of coordination game being played among SC holders and its equilibria. When the volatility of reserve assets is unknown, par convertibility is resilient to small shocks but fails with large negative public shocks to reserve asset values, even if they are initially high. Public information disclosure increases (reduces) run risk for sufficiently low (high) holders' priors about reserve quality. Transparency and quality of reserve assets have distinct effects on issuer failure risk. Our results point to a trade-off between peg stability and issuer fragility.
Creation-Date: 2024-01
File-URL: https://www.bis.org/publ/work1164.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1164.htm
File-Format: text/html
Number: 1164
Keywords: stablecoins, crypto, global games, bank runs
Classification-JEL: C70, D83, D84, E42, G01, G20
Handle: RePEc:bis:biswps:1164