ECB: Stablecoins are highly influenced by US monetary policy and are not a "safe haven" during market turmoil

The European Central Bank (ECB) has challenged the view that stablecoins are a "safe haven" for investors during periods of market turmoil, arguing that they are actually highly influenced by U.S. monetary policy. The working paper examines the connection between U.S. monetary policy, money market funds (MMFs), and stablecoins. "Monetary policy, especially U.S. dollar policy, is key to connecting cryptocurrencies and traditional financial markets," the authors concluded. The article points out that stablecoins have a fixed price and are usually pegged to a fiat currency (usually the U.S. dollar), which is vulnerable to shocks from traditional financial markets, such as changes in U.S. monetary policy, such as interest rate hikes. The ECB evaluated data from 2019 and said that the U.S. government's interest rate hikes caused the market value of stablecoins to fall by 10% in the following 12 weeks. At the same time, it found that traditional non-crypto assets, such as money market funds, actually received a large influx of new capital during the same period. (Decrypt)