Cryptodollars and the Hierarchy of Money

Abstract

US Dollar stablecoins are onchain financial instruments representing a dollar equivalent. This paper focuses on a subset of stablecoins, cryptodollars, which we define as redeemable for 'higher-level' money in the hierarchy of money. By analyzing primary market issuance and redemptions, we demonstrate that these stablecoins have provided reliable value ('maintained par') in the currently available market infrastructure. With sensible management/regulation and further maturation of market infrastructure, cryptodollars have the potential to i) lower secondary market volatility, ii) broader onchain financial impact, as well as deeper integration between on-and offchain ecosystems. 

Keywords: cryptodollars, stablecoins, hierarchy of money

JEL Classification: E40, G15, G18, G21, G23