Can Stablecoins Be Stable?

95 Pages Posted: 21 Sep 2022 Last revised: 26 Oct 2022

See all articles by Adrien d'Avernas

Adrien d'Avernas

Stockholm School of Economics

Vincent Maurin

Swedish House of Finance

Quentin Vandeweyer

University of Chicago - Booth School of Business

Date Written: September 19, 2022


This paper provides a general framework for analyzing the stability of stablecoins, cryptocurrencies pegged to a traditional currency. We study the problem of a monopolist platform that can earn seigniorage revenues from issuing stablecoins. We characterize stablecoin issuance-redemption and pegging dynamics under various degrees of commitment to policies. Even under full commitment, the stablecoin peg is vulnerable to large demand shocks. Backing stablecoins with collateral helps to stabilize the platform but is costly for the platform's equity (token) holders. Combined with collateral, decentralization can act as a substitute for commitment.

Keywords: Stablecoins, Cryptocurrencies, Target Leverage, Dynamic Games, Coase Conjecture

JEL Classification: E42, G12

Suggested Citation

d'Avernas, Adrien and Maurin, Vincent and Vandeweyer, Quentin, Can Stablecoins Be Stable? (September 19, 2022). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2022-131, Proceedings of the EUROFIDAI-ESSEC Paris December Finance Meeting 2022, Available at SSRN: or

Adrien D'Avernas

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383

Vincent Maurin

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm

Quentin Vandeweyer (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S Woodlawn Ave
Chicago, IL 60637
United States

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