Making Stablecoins Stable

IMF Working Papers, April 10, 2026

Source details

Authors: Bo Li, Tommaso Mancini-Griffoli, Marcello Miccoli, Brandon Joel Tan, Longmei Zhang
Published: April 10, 2026
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229044349.001

Payment stablecoins are privately issued digital money with the potential to enhance payment efficiency, foster innovation, and improve financial inclusion.
Stablecoins are vulnerable to runs and associated welfare losses.
Core tradeoff examined: requiring issuers to hold safe assets reduces run risk but may lower issuers’ profitability and thus their incentive to provide stablecoins, potentially hampering payment innovation and product variety.
The paper develops a theoretical framework to navigate the tradeoff between stability and incentivizing issuance.

Model basis: Diamond and Dybvig (1983) model of bank runs.
Key finding: An unregulated private equilibrium is suboptimal.
Behavioral result: Stablecoin issuers hold risky assets to maximize profits, which increases run risk.
Social planner improvements:
- Requiring backing of stablecoins with a safe asset (example given: central bank reserves in a narrow bank setting).
- Creating conditions for other sources of revenue for issuers (examples given: central bank reserves remuneration; policies for payment data utilization).
The model serves as a baseline for policy discussion and identifies considerations for further study.

Require safe-asset backing for stablecoins to lower run risk (explicitly noted: central bank reserves in a narrow bank setting as an example).
Support issuer profitability through alternative revenue channels to preserve incentives for issuance and payment innovation:
- Central bank reserves remuneration.
- Policies enabling payment data utilization.
Balance regulatory design to avoid suppressing innovation and reducing product variety while ensuring financial stability.

Subjects: Bank deposits; Central banks; Commercial banks; Financial institutions; Financial services; Financial statements; International reserves; Public financial management (PFM).
Keywords: Bank deposits; Commercial banks; digital money; Financial statements; Global; International reserves; issuers' profitability; payment efficiency; payment innovation; reserve backing; stablecoin issuer; Stablecoin issuer; Stablecoins.