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Anton van der Kraaij

17 November 2021
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2021
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Abstract
The market capitalisation of stablecoins has increased from USD 5 billion to USD 120 billion since 2020. Despite their recent growth, stablecoins still only account for around 6% of the estimated USD 2 trillion total market capitalisation of crypto-assets, though interlinkages between stablecoins and crypto-assets imply a correlation of risks between these market segments. At the same time, the functions served by stablecoins within the ecosystem have multiplied. In addition to acting as a relatively safe “parking space” for crypto volatility, stablecoins serve as a bridge between fiat currencies and crypto-assets and are used for trading or as collateral in crypto-asset derivative transactions or in decentralised finance. Against this background of stablecoins’ interlinkages with the wider crypto-asset market and their direct links to the traditional financial system, this box analyses the risks associated with the evolving functions of stablecoins and the financial stability implications of such risks. It concludes that while stablecoins currently pose limited financial stability risks in the euro area, their growing size, usage and connected infrastructure may alter this assessment in the future. Nevertheless it highlights that the global reach of this market underscores the need for global standard-setting bodies to further assess the extent to which existing standards are appropriate for, and applicable to, stablecoins and close any gaps as necessary.
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G28. : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
5 May 2020
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 10
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Abstract
Stablecoins provide an alternative to volatile crypto-assets. Depending on their asset management function, they may fall under different regulatory regimes or – with certain design features – under none at all. Given their potential size, global stablecoins could pose risks to financial stability. Such arrangements need a robust regulatory framework.
JEL Code
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
G15 : Financial Economics→General Financial Markets→International Financial Markets
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
24 May 2018
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2018
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Abstract
This box assesses potential financial stability concerns related to the rapidly growing market for crypto-assets. Crypto-assets (e.g. bitcoin, ether and ripple) are a new, innovative and high-risk digital asset class.21 Recent price developments and market interest in crypto-assets have given rise to concerns about potential financial stability implications. This box presents key facts on crypto-assets, concluding that they do not currently pose a material risk to financial stability in the euro area, but warrant careful monitoring.
2 February 2017
WORKING PAPER SERIES - No. 2010
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Abstract
We present a tractable framework to assess the systemic implications of bail-in. To this end, we construct a multi-layered network model where each layer represents the securities cross holdings of a specific seniority among the largest euro area banking groups. On this basis, the bail-in of a bank can be simulated to identify the direct contagion risk to the other banks in the network. We find that there is no direct contagion to creditor banks. Spill-overs also tend to be small due to low levels of securities cross-holdings in the interbank network. We also quantify the impact of a bail-in on the different liability holders. In the baseline scenario, shareholders and subordinated creditors are always affected by the bail-in, senior unsecured creditors in 75% of the cases. Finally, we compute the effect of the bail-in on the network topology in each layer. We find that a bail-in significantly reshapes interbank linkages within specific seniority layers.
JEL Code
G01 : Financial Economics→General→Financial Crises
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
C63 : Mathematical and Quantitative Methods→Mathematical Methods, Programming Models, Mathematical and Simulation Modeling→Computational Techniques, Simulation Modeling
24 May 2016
FINANCIAL STABILITY REVIEW - ARTICLE
Financial Stability Review Issue 1, 2016
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Abstract
The new bail-in tool in the EU bank resolution toolkit is an important step forward to safeguard financial stability in Europe, notably in relation to mitigating moral hazard and other problems inherent in a strong reliance on bailouts. At the same time, it is important to understand the potential contagion channels in the financial system following a bail-in and prior to resolution in order to assess potential systemic implications of the use of the bail-in tool. This special feature outlines salient features of the new requirements and then presents a multi-layered network model of banks’ bail-inable securities that could help in gauging potential contagion risk and, prior to a resolution, identifying mitigating measures to avoid systemic implications.
JEL Code
G00 : Financial Economics→General→General