The Federal Reserve Bank of Boston and the Federal Reserve Bank of New York published highlights from their second virtual Conference on Stablecoins and Tokenization, focused on how the rapid growth of stablecoins and tokenization could affect the stability of the broader financial system. The agenda linked these innovations to financial stability risk assessment and to payment services, which the conference materials describe as central to the Federal Reserve’s responsibilities. Conference papers explored channels through which stablecoins and tokenized markets could create or shift risks. Research presented by Cristoph Bertsch (Sveriges Riksbank) modelled stablecoins as a link between crypto and traditional finance and argued that “excessive” adoption can heighten fragility when new adopters increase the “flightiness” of the investor pool, raising the risk of run-like dynamics. In the keynote, Franklin Allen (Imperial College London) discussed how monetary innovation may interact with a changing financial “architecture” that includes growing nonbank financial intermediaries, suggesting public sector monetary innovations could shift activity from banks to nonbanks with potentially stabilizing effects, while private sector innovations have more ambiguous implications. Federal Reserve Board staff introduced a framework to compare vulnerabilities across three “money-like products” (stablecoins, tokenized money market funds, and money market fund exchange-traded funds) using fragility concepts such as liquidity transformation, threshold effects, contagion effects, and reactive investors, while a New York Fed paper on tokenized markets emphasized that instantaneous settlement can reduce settlement failure risk but may introduce other frictions, including the need to reveal private information. The conference materials note that seven papers and a keynote address were presented, and the papers are available on bostonfed.org.
Federal Reserve Bank of Boston 2025-05-19
Federal Reserve Bank of Boston and Federal Reserve Bank of New York host conference on stablecoins and tokenization risks for financial stability
The Federal Reserve Banks of Boston and New York discussed stablecoins and tokenization's impact on financial stability at their virtual conference. Key topics included stablecoin risks, monetary innovation's interaction with nonbank intermediaries, and a framework for assessing vulnerabilities in money-like products. The conference featured seven papers and a keynote address, available on bostonfed.org.