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May 17, 2023

“Un” Stablecoins and Risks to Investors, Consumers, and Economic Productivity

Below is the Introduction to the Fact Sheet. Read the full Fact Sheet here

The short history of stablecoins has been characterized by instability, bank-like runs, and the evaporation of tens of billions of dollars in investor losses. The use of the moniker “stablecoin” has become a misnomer in that these financial products are anything but stable. A more appropriate name would be “unstablecoins” considering how susceptible they are to bank-like runs and how often they depeg from their “stable” value.

Stablecoins are remarkably similar to money market funds – an industry that had to be bailed out by the federal government in 2008 and 2020 after experiencing bank-like runs. And despite industry fantasies and talking points touting stablecoins as an innovative and inclusive form of payment, stablecoins have not lived up to the hype as a payment mechanism outside the unregulated crypto ecosystem. In fact, more than 80 percent of the trade volume on major centralized exchanges involves stablecoins – demonstrating that their primary use case is simply trading activity for no purpose other than the pursuit of speculative profit.[1]

However, despite their instability and lack of prowess as a form of payment, policymakers have debated codifying these money market fund-like products as a payment mechanism. For the reasons stated below, regulators and policymakers should stop and consider the risks to investors, consumers, and the economy before legislating stablecoins into a form of payments.

[1]     Share of Trade Volume by Paid Denomination, The Block (last visited May 16, 2023),

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