Template-Type: ReDIF-Paper 1.0
Author-Name: Inaki Aldasoro
Author-X-Name-First: Inaki
Author-X-Name-Last: Aldasoro
Author-Name: Giulio Cornelli
Author-X-Name-First: Giulio
Author-X-Name-Last: Cornelli
Author-Name: Massimo Ferrari Minesso
Author-X-Name-First: Massimo
Author-X-Name-Last: Ferrari Minesso
Author-Name: Leonardo Gambacorta
Author-X-Name-First: Leonardo
Author-X-Name-Last: Gambacorta
Author-Name: Maurizio Michael Habib
Author-X-Name-First: Maurizio Michael
Author-X-Name-Last: Habib
Title: Stablecoins, money market funds and monetary policy
Abstract: Using a new series of crypto shocks, we document that money market funds' (MMF) assets under management, and traditional financial market variables more broadly, do not react to crypto shocks, whereas stablecoin market capitalization does. U.S. monetary policy shocks, in contrast, drive developments in both crypto and traditional markets. Crucially, the reaction of MMF assets and stablecoin market capitalization to monetary policy shocks is different: while prime-MMF assets rise after a monetary policy tightening, stablecoin market capitalization declines. In assessing the state of the stablecoin market, the risk-taking environment as dictated by monetary policy is much more consequential than flight-to-quality dynamics observed within stablecoins and MMFs.
Creation-Date: 2024-10
File-URL: https://www.bis.org/publ/work1219.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1219.htm
File-Format: text/html
Number: 1219
Keywords: stablecoins, crypto, Bitcoin, monetary policy shocks, money market funds
Classification-JEL: E50, F30
Handle: RePEc:bis:biswps:1219