Stablecoins

Early-Warning Signals of Political Risk in Stablecoin Markets: Human and Algorithmic Behavior Around the 2024 U.S. Election ArXiv ID: 2512.00893 “View on arXiv” Authors: Kundan Mukhia, Buddha Nath Sharma, Salam Rabindrajit Luwang, Md. Nurujjaman, Chittaranjan Hens, Suman Saha, Tanujit Chakraborty Abstract We study how the 2024 U.S. presidential election, viewed as a major political risk event, affected cryptocurrency markets by distinguishing human-driven peer-to-peer stablecoin transactions from automated algorithmic activity. Using structural break analysis, we find that human-driven Ethereum Request for Comment 20 (ERC-20) transactions shifted on November 3, two days before the election, while exchange trading volumes reacted only on Election Day. Automated smart-contract activity adjusted much later, with structural breaks appearing in January 2025. We validate these shifts using surrogate-based robustness tests. Complementary energy-spectrum analysis of Bitcoin and Ethereum identifies pronounced post-election turbulence, and a structural vector autoregression confirms a regime shift in stablecoin dynamics. Overall, human-driven stablecoin flows act as early-warning indicators of political stress, preceding both exchange behavior and algorithmic responses. ...

Concentrated N-dimensional AMM with Polar Coordinates in Rust ArXiv ID: 2510.05428 “View on arXiv” Authors: Vasily Tolstikov, Marcus Wentz, Joseph Schiarizzi, Derek Ding Abstract We expand on the recent development of n-dimensional automated market makers for stablecoins by showing a way to build concentrated liquidity positions with ticks in polar coordinates in Rust, including the featured ability to skew said concentrated liquidity. We highlight the risk of stacking too many stablecoin pools and how to hedge said risk. ...

Optimal Control of Reserve Asset Portfolios for Pegged Digital Currencies ArXiv ID: 2508.09429 “View on arXiv” Authors: Alexander Hammerl, Georg Beyschlag Abstract Stablecoins promise par convertibility, yet issuers must balance immediate liquidity against yield on reserves to keep the peg credible. We study this treasury problem as a continuous-time control task with two instruments: reallocating reserves between cash and short-duration government bills, and setting a spread fee for either minting or burning the coin. Mint and redemption flows follow mutually exciting processes that reproduce clustered order flow; peg deviations arise when redemptions exceed liquid reserves within settlement windows. We develop a stochastic model predictive control framework that incorporates moment closure for event intensities. Using Pontryagin’s Maximum Principle, we demonstrate that the optimal control exhibits a bang-off-bang structure: each asset type is purchased at maximum capacity when the utility difference exceeds the corresponding difference in shadow costs. Introducing settlement windows leads to a sampled-data implementation with a simple threshold (soft-thresholding) structure for rebalancing. We also establish a monotone stress-response property: as expected outflows intensify or windows lengthen, the optimal policy shifts predictably toward cash. In simulations covering various stress test scenarios, the controller preserves most bill carry in calm markets, builds cash quickly when stress emerges, and avoids unnecessary rotations under transitory signals. The proposed policy is implementation-ready and aligns naturally with operational cut-offs. Our results translate empirical flow risk into auditable treasury rules that improve peg quality without sacrificing avoidable carry. ...

SoK: Stablecoins for Digital Transformation – Design, Metrics, and Application with Real World Asset Tokenization as a Case Study ArXiv ID: 2508.02403 “View on arXiv” Authors: Luyao Zhang Abstract Stablecoins have become a foundational component of the digital asset ecosystem, with their market capitalization exceeding 230 billion USD as of May 2025. As fiat-referenced and programmable assets, stablecoins provide low-latency, globally interoperable infrastructure for payments, decentralized finance, DeFi, and tokenized commerce. Their accelerated adoption has prompted extensive regulatory engagement, exemplified by the European Union’s Markets in Crypto-assets Regulation, MiCA, the US Guiding and Establishing National Innovation for US Stablecoins Act, GENIUS Act, and Hong Kong’s Stablecoins Bill. Despite this momentum, academic research remains fragmented across economics, law, and computer science, lacking a unified framework for design, evaluation, and application. This study addresses that gap through a multi-method research design. First, it synthesizes cross-disciplinary literature to construct a taxonomy of stablecoin systems based on custodial structure, stabilization mechanism, and governance. Second, it develops a performance evaluation framework tailored to diverse stakeholder needs, supported by an open-source benchmarking pipeline to ensure transparency and reproducibility. Third, a case study on Real World Asset tokenization illustrates how stablecoins operate as programmable monetary infrastructure in cross-border digital systems. By integrating conceptual theory with empirical tools, the paper contributes: a unified taxonomy for stablecoin design; a stakeholder-oriented performance evaluation framework; an empirical case linking stablecoins to sectoral transformation; and reproducible methods and datasets to inform future research. These contributions support the development of trusted, inclusive, and transparent digital monetary infrastructure. ...

Automated Market Making: the case of Pegged Assets ArXiv ID: 2411.08145 “View on arXiv” Authors: Unknown Abstract In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token. Our approach employs multi-level nested Ornstein-Uhlenbeck (OU) processes, for which we derive key properties and develop calibration and filtering techniques. Then, we design an automated market maker (AMM) model specifically tailored for the swapping of closely related cryptoassets. Distinct from existing models, our AMM leverages the unique exchange rate dynamics provided by the multi-level nested OU processes, enabling more precise risk management and enhanced liquidity provision. We validate the model through numerical simulations using real-world data for the USDC/USDT and wstETH/WETH pairs, demonstrating that it consistently yields efficient quotes. This approach offers significant potential to improve liquidity in markets for pegged assets. ...

Stablecoin Runs and Disclosure Policy in the Presence of Large Sales ArXiv ID: 2408.07227 “View on arXiv” Authors: Unknown Abstract Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders increases in the presence of a large sale. While precise public knowledge reduces (increases) the probability of a run when fundamentals are strong (weak), interestingly, more precise private signals increase (reduce) the probability of a run when fundamentals are strong (weak), potentially explaining the stability of opaque stablecoins. The total run probability can be decomposed into components representing risks from large sales and poor collateral. By analyzing how these risk components vary with respect to information uncertainty and fundamentals, we can split the fundamental space into regions based on the type of risk a stablecoin issuer is more prone to. We suggest testable implications and connect our model’s implications to real-world applications, including depegging events and the no-questions-asked property of money. ...

Autonomous Money Supply Strategy Utilizing Control Theory ArXiv ID: 2407.13232 “View on arXiv” Authors: Unknown Abstract Decentralized Finance (DeFi) has reshaped the possibilities of reserve banking in the form of the Collateralized Debt Position (CDP). Key to the safety of CDPs is the money supply architecture that enables issued debt to maintain its value. In traditional markets, and with respect to the United States Dollar system, interest rates are set by the Federal Reserve in an attempt to influence the effects of excessive inflation. DeFi enables a more transparent approach that typically relies on interest rates or other debt recovery mechanisms being directly informed by asset price. This research investigates contemporary DeFi money supply and debt management strategies and their limitations. Furthermore, this paper introduces a time-weighted approach to interest rate management that implements a Proportional-Integral-Derivative control system to constantly adapt to market activities and protect the value of issued currency, while addressing observed limitations. ...

No Questions Asked: Effects of Transparency on Stablecoin Liquidity During the Collapse of Silicon Valley Bank ArXiv ID: 2407.11716 “View on arXiv” Authors: Unknown Abstract Fiat-pegged stablecoins are by nature exposed to spillover effects during market turmoil in Traditional Finance (TradFi). We observe a difference in TradFi market shocks impact between various stablecoins, in particular, USD Coin (USDC) and Tether USDT (USDT), the former with a higher reporting frequency and transparency than the latter. We investigate this, using top USDC and USDT liquidity pools in Uniswap, by adapting the Marginal Cost of Immediacy (MCI) measure to Uniswap’s Automated Market Maker, and then conducting Difference-in-Differences analysis on MCI and Total Value Locked (TVL) in USD, as well as measuring liquidity concentration across different providers. Results show that the Silicon Valley Bank (SVB) event reduced USDC’s TVL dominance over USDT, increased USDT’s liquidity cost relative to USDC, and liquidity provision remained concentrated with pool-specific trends. These findings reveal a flight-to-safety behavior and counterintuitive effects of stablecoin transparency: USDC’s frequent and detailed disclosures led to swift market reactions, while USDT’s opacity and less frequent reporting provided a safety net against immediate impacts. ...