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
Title: Stablecoins and safe asset prices
Abstract: This paper examines the impact of dollar-backed stablecoin flows on short-term US Treasury yields using daily data from 2021 to 2025. Estimates from instrumented local projection regressions suggest that a 2-standard deviation inflow into stablecoins lowers 3-month Treasury yields by 2-2.5 basis points within 10 days, with limited to no spillover effects on longer tenors. We also find evidence of asymmetric effects: stablecoin outflows raise yields by two to three times as much as inflows lower them. Decomposing the yield impact by issuer shows that USDT (Tether) has the largest contribution followed by USDC (Circle), consistent with their relative size. Our results highlight stablecoins' growing footprint in safe asset markets, with implications for monetary policy transmission, stablecoin reserve transparency, and financial stability.
Creation-Date: 2025-05
File-URL: https://www.bis.org/publ/work1270.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1270.htm
File-Format: text/html
Number: 1270
Keywords: stablecoins, treasury securities, money market funds, safe assets
Classification-JEL: E42, E43, G12, G23
Handle: RePEc:bis:biswps:1270