Stablecoins and the Financing of the Real Economy

Abstract

Stablecoins are crypto-assets that aim to maintain a stable value relative to a fiat currency. This paper documents one implication of their massive growth since 2020 for the financing of the real economy. The largest stablecoins manage their peg with the US dollar by holding short-term safe assets. We identify changes in the stablecoin demand for US dollar-denominated commercial papers (CP) by exploiting cross-sectional and time-varying heterogeneity in the main stablecoins’ reserve assets policy. We show that CP issuers catered to the additional demand from stablecoins by issuing more, illustrating the implications of stablecoins for financial stability and the financing of the real economy

Keywords: Crypto-Assets, Stablecoins, Financial Markets, Safe Assets

JEL Classification: G14, G23, G29