Paper: arXiv 2510.10469

Authors: Hongzhe Wen, R. S. M. Lau

Abstract

Stablecoins have emerged as a significant component of global financial infrastructure, with aggregate market capitalization surpassing USD250 billion in 2025. Their increasing integration into payment and settlement systems has simultaneously introduced novel channels of systemic exposure, particularly liquidity risk during periods of market stress. This study develops a hybrid monetary architecture that embeds fiat-backed stablecoins within a central bank-anchored framework to structurally mitigate liquidity fragility. The proposed model combines 100 percent reserve backing, interoperable redemption rails, and standing liquidity facilities to guarantee instant convertibility at par. Using the 2023 SVB USDC de-peg event as a calibrated stress scenario, we demonstrate that this architecture reduces peak peg deviations, shortens stress persistence, and stabilizes redemption queues under high redemption intensity. By integrating liquidity backstops and eliminating maturity-transformation channels, the framework addresses run dynamics ex ante rather than through ad hoc intervention. These findings provide empirical and theoretical support for a hybrid stablecoin-CBDC architecture that enhances systemic resilience, preserves monetary integrity, and establishes a credible pathway for stablecoin integration into regulated financial systems.

Complexity vs Empirical Score

  • Math Complexity: 3.5/10
  • Empirical Rigor: 4.0/10
  • Quadrant: Philosophers — conceptual discussion, limited math and data

Why this score: The paper presents a conceptual hybrid monetary architecture for stablecoins and CBDCs, using the 2023 USDC de-peg event as a scenario. However, the provided text focuses primarily on policy narrative and qualitative literature review rather than rigorous mathematical derivations or deep empirical backtesting.

Research Flowchart

  flowchart TD
    A["Research Goal: Mitigate stablecoin liquidity risk & structural fragility"] --> B["Develop Hybrid Monetary Architecture<br/>(100% Reserves, Interoperable Rails, Standing Facilities)"]
    
    B --> C["Calibrate Stress Model<br/>(Input: 2023 SVB USDC De-peg Data)"]
    
    C --> D["Simulate High Redemption Intensity & Run Dynamics"]
    
    D --> E["Key Outcomes:<br/>• Reduced peak peg deviations<br/>• Shortened stress persistence<br/>• Stabilized redemption queues"]
    
    E --> F["Policy Impact: Framework for hybrid Stablecoin-CBDC integration"]