Stablecoins and the Financing of the Real Economy

Abstract

Stablecoins are crypto-assets aiming at maintaining their value stable against a fiat currency. This paper documents one implication for the financing of the real economy of their massive growth since 2020. The largest stablecoins manage their peg with the US dollar by holding near-money assets, like US treasuries, commercial papers or bank deposits. We exploit cross-sectional and time-varying variations of the main stablecoins' reserve asset.

We show that changes in stablecoins' circulating tokens have been correlated with the issuance of commercial papers (CP), only if and when CP back the stablecoins. We do not find any evidence of an impact on CP rates, which indicates that CP issuers responded to the additional demand by issuing more. This suggests stablecoins have already reached a critical enough size to establish a direct connection between crypto-assets and the real economy, by changing the financing mix of firms. Importantly, this connection operates in normal times, and is not limited to extreme events like runs. Going forward, the evolving composition of stablecoin issuers' asset side and their pegging mechanisms is key to determine the interactions between crypto markets, financial markets and the real economy.

Keywords: Stablecoins; cryptocurrency; CBDC

JEL Classification: G14, G23, G29