Overview

A $100 stablecoin purchase funded from a bank deposit inserts a private liability while moving reserves into Treasury bills, bank deposits or central-bank money. This checkpoint follows the same event through bank lending and fiscal space, then separates first-round accounting from equilibrium adjustment. In the baseline US model, $2 trillion of domestic, Treasury-bill-backed adoption lowers long-run output about 0.03% but raises transition output roughly 0.3% above initial steady state. Reserve composition, public ownership, foreign demand and debt structure can change the sign; these are calibrated scenarios, not forecasts.

Learning outcomes

$100 illustration: the household deposit falls, the stablecoin liability rises and the issuer acquires reserves; the reserve asset determines who receives funds.
The same expansion can produce a short-run output gain, a small long-run loss and positive modelled welfare because adjustment speeds and measures differ.
Reserve composition, holder location and public-debt structure can reverse the baseline sign; model branches are not policy cutoffs.

Keywords

StablecoinsPortfoliosLendingFiscalWelfareTransition

The First Checkpoint: One Token, Two Channels, Several Outcomes

This checkpoint connects the stablecoin balance sheet to the two macroeconomic channels already in view: pressure on bank lending and support for fiscal space. The practical task is to read one issuance event across households, issuers, banks, firms and government, then distinguish what happens immediately from what emerges after prices and portfolios adjust. That systems view explains why the same stablecoin expansion can produce a small long-run output loss, a short-run output gain, a welfare improvement and a larger stress risk at the same time.

One issuance event, read across five balance sheets

Take the stylised example used in the BIS Annual Economic Report 2026: a household buys $100 of stablecoins using an existing bank deposit. This is an accounting illustration, not a forecast of how every purchase is financed. The household’s deposit falls by $100 and their stablecoin holding rises by $100. The stablecoin issuer records a $100 liability to the holder and acquires reserve assets. The essential point is that the household has exchanged one liquid claim for another, while the issuer has inserted a new private liability into the monetary system.

The reserve asset determines where the counterparties move. In the report’s government-bill reserve scenario, the issuer uses the proceeds to buy $100 of Treasury bills, initially purchasing $75 from other non-bank financial institutions and $25 from banks. The sellers receive deposits or other liquid funds, while the bank sector loses the bills sold by its own balance sheet and experiences a change in the distribution of deposits. The report’s simplified numbers are chosen to illustrate the direction of the first-round shifts; they do not describe the reserve portfolio of every issuer.

Now read the same event through the bank-lending channel. The household has fewer retail deposits, or at least is less willing to supply the old quantity at the old rate. Banks compete harder for deposits and offer greater remuneration. That narrows the liquidity premium they once earned from deposit funding. Higher funding costs then reach the price of loans to firms. The firm’s borrowing, capital accumulation and output can fall, although cash substitution, equity finance, reduced bank bill holdings and other funding sources cushion the change.

Read it through the fiscal-space channel. The issuer has become an additional buyer of Treasury bills. If that demand raises bill prices and lowers short-term yields, the government can refinance part of its debt more cheaply. Its budget has room to reduce distortionary output taxes or increase spending. The public sector’s gain is not the token itself; it is the lower financing burden that can be passed through a specified fiscal rule.

These are not two unrelated transactions. They are two readings of the same reallocation. The household’s portfolio choice affects the bank’s liabilities. The issuer’s reserve choice affects the bank’s assets and the government’s financing market. The firm responds to the loan price, while the government responds to debt-service costs.

Published by DeepMox

FAQ

What does a $100 stablecoin purchase change immediately?

It reduces the household’s deposit, adds a stablecoin holding, gives the issuer a matching liability and moves funds into reserve assets. The example illustrates first-round accounting, not every purchase path.

Why can short-run and long-run stablecoin effects differ?

Fiscal relief can affect output quickly when Treasury markets reprice, while credit and capital adjust more slowly as firms refinance debt and investment. The time path therefore need not match the long-run result.

Which assumptions can reverse the model’s baseline sign?

Reserve composition, central-bank-reserve ownership, foreign demand, public-debt levels and the Treasury-bill share can all change the balance between bank lending and fiscal space. The reported thresholds belong to the calibrated US model.

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Stablecoins: One Token, Two Channels

The First Checkpoint: One Token, Two Channels, Several Outcomes

One issuance event, read across five balance sheets

FAQ