Stablecoins show ‘flight to safety’ dynamics – NY Fed paper

Researchers argue these runs on stablecoins could cause wider financial instability

Stablecoins TO

Investors run from risky to more secure stablecoins when cryptocurrency prices fall, research published by the Federal Reserve Bank of New York finds. 

Without proper regulation these dynamics could lead to financial instability, the paper says. The market exhibits very similar dynamics to those of money market funds, it says. 

The research paper by Kenechukwu Anadu et al looked at data from January 2021 to March 2023. “If stablecoins were to grow larger and more interconnected with the financial

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