An Econometric Investigation on the Stability of Stablecoins (DNB)
De Nederlandsche Bank (DNB) published a working paper that argues that major USD‑denominated stablecoins exhibit heterogeneous and time‑varying volatility, challenging the assumption of uniform stability. Using a multi‑model framework focused on returns, they find USDC and TUSD are highly sensitive to monetary, macro‑uncertainty, market‑volatility, and crypto shocks, while USDT and DAI show muted, short‑lived responses and primarily absorb volatility. Time‑varying connectedness analysis indicates stablecoins are usually volatility sinks but become more tightly integrated with global risk factors during stress episodes with short‑horizon spillovers dominating in crises and long‑horizon co‑movement rising since 2021. The authors argue that stablecoins should not be treated as a single risk category and that differentiated, reserve‑sensitive prudential and liquidity standards are warranted as they become embedded in macro‑financial transmission. [DNB]
