The Federal Reserve Banks of Boston and New York recently hosted the second Conference on Stablecoins and Tokenization, focusing on the evolving roles of stablecoins and tokenization in the financial system. Kartik Athreya, Director of Research at the New York Fed, noted a significant rise in blockchain markets, including stablecoins. He emphasized the importance of understanding these innovations for assessing financial stability risks and fulfilling Federal Reserve responsibilities.

Cristoph Bertsch from Sveriges Riksbank presented his paper "Stablecoins: Adoption and Fragility," highlighting that while stablecoins link crypto and traditional markets, they pose potential stability risks due to their susceptibility to investor "runs." Franklin Allen from Imperial College London discussed how monetary innovations impact financial architecture. His research suggested that public sector innovations might enhance stability by shifting activities from banks to nonbanks, though private sector impacts are less clear.

Patrick McCabe and JP Perez-Sangimino introduced a framework for analyzing vulnerabilities in new "money-like products" such as stablecoins and tokenized money market funds. They noted varying degrees of fragility across these products as they evolve.

New York Fed economist Michael Lee presented "Optimal Design of Tokenized Markets," discussing how tokenization changes market operations by ensuring instantaneous settlement but also introduces challenges related to private information disclosure.

The conference featured seven paper presentations available on bostonfed.org. Presenters clarified that their views were personal and not representative of their employers.

For further information or interviews with Boston Fed economists, journalists can contact Amanda Blanco from the communications team at the Federal Reserve Bank of Boston.