According to a study conducted by the Federal Reserve Banks of Boston and New York, stablecoins can bring instability to the financial system as a whole.
The authors of the paper have compared USDT and USDC with money market funds and found similarities in the behavior of holders of "stablecoins" and mutual funds in times of stress, as well as a number of other vulnerabilities.
Subscribe to our Telegram channelto get weekly short digests about events that shape the crypto world
The paper says:
"Our findings show that stablecoins are vulnerable to runs during periods of broad crypto market dislocation as well as idiosyncratic stress events. Should stablecoins continue to grow and become more interconnected with key financial markets [...], they could become a source of financial instability for the broader financial system."
They have also suggested stablecoins have a threshold of $0.99, below which redemptions accelerate.