Stablecoins as Nonbank Money

Abstract

I provide plausibly identified evidence that stablecoins function as no-questions-asked (NQA) money. The identification strategy exploits Korea's 2024 martial law crisis, representing an arguably exogenous demand shock for NQA money in Korean cryptocurrency exchanges. Using hand-collected on-chain data, I show that stablecoin inflows increase significantly, both in absolute terms and relative to non-stablecoin inflows, following the shock. These effects are amplified when inflows are driven by large market participants, are concentrated, and originate from offshore exchanges. The findings highlight that stablecoins, as nonbank monetary innovations, serve as money and provide funding liquidity, contributing to halting liquidity spirals.

Keywords: Stablecoins, nonbanks, money, monetary innovation, financial stability, shadow banking, liquidity, cryptocurrency, crisis, martial law, medium of exchange, digital currency, CBDC

JEL Classification: E42, G01, G14, F31