Making Stablecoins Stable

2026

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AI-generated summary

This paper provides a theoretical framework for making stablecoins stable by analyzing reserve backing policies and their impact on run risk and issuance incentives.

* Examines a theoretical model of stablecoin issuance and run risk, building on the Diamond-Dybvig bank run model.
* Analyzes the trade-offs between stablecoin stability and incentivizing issuance, considering different reserve backing policies.
* Discusses policy implications and potential tools for achieving socially optimal stablecoin allocations.

Tags: stablecoins, digital money, financial stability, regulation, reserve backing

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