The Federal Reserve Banks of Boston and New York released a paper on September 27 titled Flight to Safety: Are Stablecoins the New Money Market Fund? Report.
The report compares stablecoins such as USDT and USDC to money market funds. Key findings in the report include the observation that stablecoins and money market funds follow similar patterns in their operation, and that stablecoins may bring benefits to the broader financial world. The system brings instability.
The report stated that the findings indicate that stablecoins are vulnerable to runs during widespread crypto market disruptions and special stress events.
If stablecoins continue to grow and become more closely linked to major financial markets such as short-term funding markets, they could become a source of financial instability for the broader financial system.