Ex-Fed Analyst Claims Stablecoins Are Less Risky than Bank Deposits


July 27, 2023


Gabriel Negrín

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According to Brendan Malone, a former Federal Reserve Board analyst, stablecoins should not be compared to the risk of bank deposits. Paradigm, a technology investment firm, commissioned the report

They claim legislative measures in the United States aim to integrate cryptocurrency payment instruments into existing banking and securities institutions. 

However, Malone contends that the risks posed by stablecoins are different. They appear to be lower than bank deposits and money market funds.

In contrast to banks, which face maturity transformation risks, stablecoins often keep reserve assets backed by short-dated Treasurys that are distinct from the issuer's assets. The duration mismatch between liabilities and long-term or risky assets is reduced as a result.

The study underlines the importance of regulatory monitoring to manage the unique risks of stablecoins while encouraging innovation. Strict bank-style regulation might hinder competition and benefit a few strong businesses.