Money Creation in Decentralized Finance: A Dynamic Model of Stablecoin and Crypto Shadow Banking
Stablecoins are at the center of debate surrounding decentralized finance. The authors develop a dynamic model to analyze the instability mechanism of stablecoins, the complex incentives of stablecoin issuers, and regulatory proposals. The model rationalizes a variety of stablecoin management strategies commonly observed in practice and characterizes an instability trap: Stability can last for a long time, but once debasement happens following negative shocks to the issuer’s reserves, price volatility persists. Capital requirement improves price stability but still fails to eliminate debasement. Restricting the riskiness of reserve assets can surprisingly destabilize price. Finally, the authors show that data privacy regulation has an unintended benefit of reducing the price volatility of stablecoins issued by data-driven platforms (e.g., Facebook).
Session Chair: Daniel XU
Professor of Economics, Duke University
Ye LI, Assistant Professor, Department of Finance, Fisher College of Business, The Ohio State University
Simon MAYER, Postdoctoral Research Fellow, Fama-Miller Center, Booth School of Business, University of Chicago
Yubo CHEN, Senior Associate Dean, Professor, and Director of Center for Internet Development and Governance at School of Economics and Management, Tsinghua University
Assistant Professor, Department of Finance, Fisher College of Business, The Ohio State UniversityYe LI joined the Department of Finance at The Ohio State University in 2017 after earning a PhD in Finance from Columbia University. His research interests include banking, capital markets, and monetary economics. Professor Li teaches corporate finance. Prior to PhD study, he worked in the investment banking department of Credit Suisse in Europe and Asia.
Senior Associate Dean, Professor, and Director of Center for Internet Development and Governance at School of Economics and Management, Tsinghua University
Yubo CHEN is Senior Associate Dean, Professor, and Director of Center for Internet Development and Governance at School of Economics and Management, Tsinghua University. He received his Ph. D. in Marketing from the University of Florida, M. Eng. in Systems Engineering and B. Eng. in Industrial Management Engineering from Southeast University. Before joining Tsinghua SEM., he was a tenured professor at Eller College of Management, University of Arizona, USA. He is a recipient of the National Science Fund for Distinguished Young Scholars from the National Natural Science Foundation of China, and selected for the Top-Notch Young Professionals Program of China.
Prof. Chen’s main research areas include 1) big data and business innovation in the networked world; 2) market transformation and business analytics in the mobile internet era; 3) digital transformation of Chinese economy, and 4) climate change and sustainability strategy. Prof. Chen has published many articles in top marketing and business journals such as the Journal of Marketing, the Journal of Marketing Research, Marketing Science, and Management Science, including one article been listed as "Most Cited Papers" at Management Science in the last ten years by ISI. His research has won many international awards and recognitions, including INFORMS Frank M. Bass Best Paper Finalist Award, MSI/Paul H. Root Award Finalist, William F. O’Dell Award Finalist, Journal of Interactive Marketing Best Paper Award and Emerald Citations of Excellence.
Prof. Chen is actively involved in many leading research institutions and professional organizations in China, U.S., and Europe. He is a member of ChinaInfo 100, the Management Committee of Tsinghua Institute of Data Science, the Global Advisory Board of The Wharton Future of Advertising Program, Academic Trustee of AiMark, and Editor-in-Chief of Journal of Marketing Science.
Prof. Chen has won many teaching awards and recognitions, including Dean’s Award for Teaching Excellence and Dean’s Course Innovation Award by Eller College of Management at the University of Arizona, Outstanding Educator of Higher Education by University of Arizona Student Alumni Association, and Teaching Excellence Award (Second Class) and Excellent Teaching Award for Executive Education at Tsinghua SEM. He currently teaches Business Innovation in the Networked World (MBA), Management and Innovation in the Big Data Era (EMBA, Master), Marketing Research Methods and Theory (PhD), and Marketing Models (PhD) at Tsinghua SEM. He has taught executive education courses or consulated to leading companies such as BMW, China Mobile, ICBC, ChemChina, AstraZeneca, Suning, Baidu and JD.com.
Professor of Economics, Duke University
Daniel XU research focuses on Productivity, International Trade, and Industrial Organization. He has received numerous grants from the National Science Foundation, the Private Enterprise Development in Low-Income Countries, and the NET Institute. His most recent work has been published in the American Economic Review, Management Science, the Review of Economic Studies, the Rand Journal of Economics, the Review of Economic Dynamics, and the World Bank Economic Review. He is currently working on projects that explore innovation, productivity, exporting and industry dynamics, with a special focus on emerging economies such as China, Colombia, Taiwan, Korea, and Turkey.
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