{
  "title": "From Par to Pressure: Liquidity, Redemptions, and Fire Sales with a Systemic Stablecoin",
  "publication": "IMF Working Papers, January 16, 2026",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2026/01/16/from-par-to-pressure-liquidity-redemptions-and-fire-sales-with-a-systemic-stablecoin-573271",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2026/01/16/from-par-to-pressure-liquidity-redemptions-and-fire-sales-with-a-systemic-stablecoin-573271",
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  "summary": "Fiat-backed stablecoins are expanding, and their issuers may attain systemic relevance as reserve portfolios grow and as they become increasingly intertwined with financial markets. This paper analyzes the resulting risks and the design choices that can mitigate them.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Authors: Marco Gross, Richard Senner\n- Date: January 16, 2026\n- Core finding: Fiat-backed stablecoins are expanding, and their issuers may attain systemic relevance as reserve portfolios grow and as they become increasingly intertwined with financial markets.\n- Central claim: Robust prudential design can substantially stabilize stablecoins and their surrounding market environment.\n- Abstracted mechanism: Redemptions deplete reserves, may prompt asset sales, depress bond market prices, thereby erode a stablecoin issuer’s solvency, and in turn amplify further redemptions."
    },
    {
      "heading": "Model and mechanisms analyzed",
      "content": "- Model scope: Captures the feedback loop between a systemic stablecoin and financial markets.\n- Key dynamics described:\n  - Redemptions → reserve depletion.\n  - Reserve depletion → potential asset sales.\n  - Asset sales → depressed bond market prices.\n  - Depressed bond market prices → erosion of issuer solvency.\n  - Eroded solvency → amplification of further redemptions."
    },
    {
      "heading": "Design dials and linked outcomes",
      "content": "- Design levers examined: capital and liquidity buffers, reserve composition, redemption gates, and others.\n- Outcomes linked to design choices:\n  - Run frequency.\n  - Fire sale intensity.\n  - Bond market volatility.\n- Conclusion from model and economics discussion: Design choices materially affect the frequency and severity of runs, the intensity of fire sales, and volatility in bond markets."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Emphasized approach: Prudential design tailored to systemic stablecoins.\n- Recommended design elements (as analyzed in the paper): \n  - Capital buffers.\n  - Liquidity buffers.\n  - Reserve composition adjustments.\n  - Redemption gates and related mechanisms.\n- Intended effect of recommendations: To substantially stabilize stablecoins and their surrounding market environment by breaking or mitigating the feedback loop between redemptions and market distress."
    },
    {
      "heading": "Subject and keywords",
      "content": "- Subject areas: Asset and liability management, Asset liquidity, Bonds, Financial institutions, Financial markets, Liquidity, Securities markets.\n- Keywords: Asset liquidity, bond market volatility, Bonds, economics discussion, fire sale intensity, Global, global financial stability, IMF working papers, Liquidity, redemption gate, Securities markets, sovereign-stablecoin nexus, Stablecoins, systemic liquidity.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2026/01/16/from-par-to-pressure-liquidity-redemptions-and-fire-sales-with-a-systemic-stablecoin-573271"
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    "Authors: Marco Gross, Richard Senner",
    "Published: January 16, 2026",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229036795.001",
    "Authors: Marco Gross, Richard Senner",
    "Date: January 16, 2026",
    "Core finding: Fiat-backed stablecoins are expanding, and their issuers may attain systemic relevance as reserve portfolios grow and as they become increasingly intertwined with financial markets.",
    "Central claim: Robust prudential design can substantially stabilize stablecoins and their surrounding market environment.",
    "Abstracted mechanism: Redemptions deplete reserves, may prompt asset sales, depress bond market prices, thereby erode a stablecoin issuer’s solvency, and in turn amplify further redemptions.",
    "Model scope: Captures the feedback loop between a systemic stablecoin and financial markets.",
    "Key dynamics described:",
    "Design levers examined: capital and liquidity buffers, reserve composition, redemption gates, and others.",
    "Outcomes linked to design choices:",
    "Conclusion from model and economics discussion: Design choices materially affect the frequency and severity of runs, the intensity of fire sales, and volatility in bond markets.",
    "Emphasized approach: Prudential design tailored to systemic stablecoins.",
    "Recommended design elements (as analyzed in the paper):",
    "Intended effect of recommendations: To substantially stabilize stablecoins and their surrounding market environment by breaking or mitigating the feedback loop between redemptions and market distress.",
    "Subject areas: Asset and liability management, Asset liquidity, Bonds, Financial institutions, Financial markets, Liquidity, Securities markets.",
    "Keywords: Asset liquidity, bond market volatility, Bonds, economics discussion, fire sale intensity, Global, global financial stability, IMF working papers, Liquidity, redemption gate, Securities markets, sovereign-stablecoin nexus, Stablecoins, systemic liquidity.",
    "**Working Paper**"
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