The Weekly Peg: An academical deluge

Eichengreen, Cecchetti, Garratt, Portes, Andolfatto, Uhlig, Wu all talk stablecoins.

Photo by Iñaki del Olmo on Unsplash

The system is developing an abundance of stablecoin experts. Where will we put them all? To think, when I first wrote about Tether in September 2017, absolutely none of the academic world had even heard of a stablecoin. I did, however, accumulate some interesting exchanges with the fabulous Perry Mehrling, one of a handful of academics who took an interest and didn’t scoff at the prospect of stablecoins developing eurodollar-esque characteristics.

Academia:

— Macro model of CBDC leaves stablecoins in the wings as competing private money (via NBER)

Summary: Paul, Ulate, and Wu develop a macroeconomic model of a retail CBDC and its effects on bank intermediation, interest rates and welfare. The focus is squarely on CBDCs versus bank deposits and cash; stablecoins appear mainly as part of the broader landscape of “new private monies” that CBDCs might crowd out or compete with. The authors show how different CBDC design choices (remuneration, limits, access) shift funding away from banks, with potential knock-on effects on credit and financial stability. For the stablecoin debate, the implication is indirect: the more compelling a CBDC design, the less room remains for large-scale adoption of privately issued stablecoins as everyday money, and vice versa.