Refine
Document Type
- Article (1)
- Working Paper (1)
Language
- English (2) (remove)
Has Fulltext
- yes (2)
Is part of the Bibliography
- no (2)
Keywords
- Stablecoins (2) (remove)
Institute
Contagious stablecoins?
(2023)
Can competing stablecoins produce efficient and stable outcomes? We study competition among stablecoins pegged to a stable currency. They are backed by interest-bearing safe assets and can be redeemed with the issuer or traded in a secondary market. If an issuer sticks to an appropriate investment and redemption rule, its stablecoin is invulnerable to runs. Since an issuer must pay interest on its stablecoin if other issuers also pay interest, competing interest-bearing stablecoins, however, are contagious and can render the economy inefficient and unstable. The efficient allocation is uniquely implemented when regulation prevents interest payments on stablecoins.
Virtual currencies have gained popularity as part of the digital transformation of the financial system. In particular stablecoins are becoming increasingly popular with consumers. The tokens, which are pegged to a value and - according to their name - promise price stability, pose significant risks from which consumers need to be protected. This article focuses first on consumerspecific risks (B.) and German consumer protection law and in particular on the applicability of a right of withdrawal from the acquisition of stablecoins (C.). Subsequently, the EU legislator’s effort to minimize price stability as well as transparency and exchangeability risks, the Markets in Crypto-assets Regulation (2023/1114), is examined in terms of its consumer protection instruments (D.).