CASE-02 · 20 min
Stablecoin under stress
Type of case study: Constructed scenario with invented figures. No real incident, no real protocol.
Scenario
A US-dollar-pegged stablecoin trades at USD 0.978 for two days. Redemption with the issuer is limited to identity-verified clients and amounts from USD 100,000. Two large lending markets accept the stablecoin as collateral.
Data
- Market price
- USD 0.978
- Minimum redemption
- USD 100,000
- Accepted as collateral by
- 2 lending markets
- Oracle source of those markets
- market price, not fixed at USD 1.00
Questions
What effect does the redemption restriction have on the arbitrage mechanism that normally holds the peg?
What follows from the lending markets using the market price as their oracle rather than assuming USD 1.00?
Analysis dimensions exercised
Institutional perspectives
Bank · Insurance