Central Bank Digital Currency Rhetoric and Stablecoin Market Responses

Abstract

This paper examines how central bank digital currency (CBDC) rhetoric affects the stablecoin market. Using data from 2020 to 2023, we analyze the effects of central bank speeches on stablecoin supply and retail attention, controlling for central bank-specific factors and other shocks. We find that pro-CBDC communication is associated with declines in stablecoin supply, while at the same time retail attention to stablecoins increases. Our results suggest that central bank CBDC rhetoric can meaningfully influence stablecoin dynamics through anticipatory market responses, including information, signaling, and regulatory-expectations, even in the absence of fully implemented CBDCs.

Keywords: Central Bank Digital Currencies, Stablecoins, Blockchain, Monetary Policy, Behavioral Economics

JEL Classification: E42, E52, G28, O33