Stability Anchors and Risk Amplifiers: Tail Spillovers Across Stablecoin Designs

2026-02-21

AI Summary

This study investigates the mechanisms through which different stablecoin designs propagate systemic risk under extreme market conditions. Employing a quantile vector autoregression (QVAR) model and integrating both daily and minute-level high-frequency event data, the analysis examines tail-risk spillovers among eight major stablecoins during three significant de-pegging episodes. The findings reveal that fiat-collateralized stablecoins act as “stability anchors,” whereas algorithmic and crypto-collateralized stablecoins substantially amplify risk under stress. Moreover, the study identifies a direct volatility transmission channel between the U.S. Dollar Index and Bitcoin that bypasses stablecoins entirely. These results indicate that non-fiat-pegged stablecoins require regulatory capital buffers two to three times higher than median levels under extreme losses, providing empirical support for differentiated regulatory frameworks.

Technology Category

• Game Theory and Economic Paradigms: Mechanism Design
• Multiagent Systems: Mechanism Design
• Reasoning under Uncertainty: Other Foundations of Reasoning under Uncertainty

Application Category

• Economics, Online Markets and Human Computation: Economic aspects of blockchain and cryptocurrencies
• Security and Privacy: Cryptocurrency and smart contracts
• Responsible Web: Human-perceived consequences of algorithmic deployment on the web

Abstract

This paper investigates systemic risk transmission across stablecoin markets using Quantile Vector Autoregression (QVAR). Analyzing eight major stablecoins with day data coverage from 2021 to 2025, supplemented by minute-level event studies on three additional coins experiencing major depegs until 2025, we document three findings. First, stabilization mechanism dictates tail-risk behavior: fiat-backed stablecoins function as "stability anchors" with near-zero net spillovers across quantiles, while algorithmic and crypto-collateralized designs become risk amplifiers specifically under extreme market conditions. Second, the theoretical risk isolation between fiat and crypto markets breaks down during stress: direct volatility channels emerge between the US Dollar Index and Bitcoin that bypass stablecoin intermediation. Third, Forbes-Rigobon contagion tests across four depeg events show heterogeneous transmission: after adjusting for volatility, algorithmic stablecoins exhibit significant residual contagion while fiat-backed coins show flight-to-quality effects. These findings imply that uniform stablecoin regulation is inappropriate; regulatory capital buffers for extreme losses should be 2--3x higher for non-fiat-backed stablecoins than median-based measures indicate.

Problem

• stablecoin
• systemic risk
• tail spillovers
• risk transmission
• depegging

Innovation

• Quantile Vector Autoregression
• tail spillovers
• stablecoin design
• systemic risk
• depeg events