Decoding the Digital Dollar

Stablecoins have quickly grown from a nascent segment of the digital assets ecosystem to a $100 billion+ market. Stablecoins already form the backbone of decentralized finance (DeFi) applications and the broader crypto-economy, but have the potential to be much more integrated with everyday consumer and commercial financial activities. The convenience, efficiency, and programmability of these digital dollars excites early adopters today. But experimentation has also brought with it a slew of new potential risk vectors, capturing the attention of top US policymakers including the US Treasury and Federal Reserve. In this report, we lay out some of the key risks associated with stablecoins today and how we can use blockchain (“on-chain”) data and market data to evaluate these risks. For stablecoins to be the future digital dollar, they will need to be studied deeply and understood clearly by policymakers, future users, and all stakeholders alike.