Monetary attribute of stablecoins: A theoretical and empirical test

Abstract

With the continuous expansion of their market size and scope of use, the monetary attribute of stablecoins has become a focal point. The identification of the monetary attribute of stablecoins is a prerequisite for their supervision. Based on the essence and macroeconomic effects of money, this paper analyzes the monetary attribute of stablecoins from theoretical and empirical perspectives. We find that in the traditional financial market, stablecoins are not widely accepted, and their increased supply competes with traditional financial assets. As new types of digital assets, they do not possess a monetary attribute. However, in the digital asset market, stablecoins are widely used. The increase in issuance pushes up asset prices and brings liquidity effects to the market. Therefore, stablecoins possess a monetary attribute in the digital asset market and play the role of "digital fiat currency". This private sector liquidity is not controlled by the government and tends to accumulate risk. Therefore, the government should clarify the legal attribute of stablecoins according to their monetary attribute, strengthen the supervision of stablecoin issuers and prevent the private sector from monopolizing the digital asset market transaction medium.

Keywords

• stablecoin
• monetary attribute
• cryptocurrency
• tvp-sv-var