Federal Reserve Access Could Reduce Stablecoin Depeg Risk by 65%

Stablecoins have become an essential component of the global financial system, with a market capitalization of around $300 billion. These digital currencies aim to provide stability and efficiency in transactions while minimizing volatility. However, their stability is often questioned due to potential risks associated with their reserve management.

The GENIUS Act was introduced in July 2025 to establish a regulatory framework for stablecoin reserves in the US. The act specifies eligible reserve assets and disclosure obligations for permitted payment stablecoin issuers. However, it remains silent on whether non-bank issuers can hold balances at the Federal Reserve.

A recent study by researchers from the University of California, Washington University in St. Louis, Drexel University, and Hong Kong University of Science and Technology analyzed the impact of Federal Reserve access on stablecoin stability. The study found that direct Federal Reserve access could provide an additional layer of stability, reducing modeled depeg risk by approximately 65%.

The researchers used a Diamond-Dybvig-style reserve-fragility model to evaluate different stablecoin reserve models. They compared four scenarios: pre-GENIUS status quo, GENIUS-compliant arrangement with deposit-eligible bank balances, GENIUS-compliant arrangement with short Treasuries, and a hypothetical regime where the issuer's reserves are held in their entirety at the Federal Reserve.

The study also highlighted the importance of reserve management during times of stress. The researchers found that moving from bank deposits to short-term treasuries is crucial for improving stablecoins' resilience. In fact, the largest modeled improvement came from a hypothetical Federal Reserve master-account scenario, where median peak deviation fell from 2.97% with Treasury-heavy GENIUS-compliant reserves to 1.03%.