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NY Fed staff investigated similarities and differences between stablecoins and money market funds (MMFs), comparing investor behavior during the stablecoin runs of 2022 and 2023 to investor behavior during the MMF runs of 2008 and 2020. They found that, similarly to MMF investors, stablecoin investors engage in flight to safety, with net flows from riskier to safer stablecoins during run periods. However, whereas in MMFs, run risk has historically materialized only in prime funds, with stablecoins, runs occurred in different stablecoin types across the 2022 and 2023 episodes. The analysis also shows that, similarly to intrafamily flows in MMFs, stablecoin flows tend to be within blockchains. A discrete "break-the-buck" threshold of $0.99 was identified, below which redemptions accelerate.

The European Central Bank (ECB) published a paper that documents the very different short-term (12-week) responses of stablecoins and money market funds (MMFs) to crypto and U.S. monetary policy shocks since 2019. It shows that crypto shocks are inconsequential for MMFs and traditional financial markets but negatively affect stablecoins. In contrast, U.S. monetary policy shocks significantly affect MMFs and stablecoins, but in opposite directions. While prime MMF assets grow after contractionary monetary policy shocks, stablecoin market capitalization significantly declines.

USDC stablecoin issuer Circle has acquired Hashnote, the issuer of the largest tokenized money market fund (TMMF), USYC. Circle intends to fully integrate USYC with USDC, offering seamless 24/7/365 access between TMMF collateral and USDC. The deal is bolstered by a strategic partnership with institutional crypto trader DRW via its subsidiary Cumberland, which incubated Hashnote. Cumberland will expand its institutional-grade liquidity and settlement capabilities in USDC and USYC, where permitted. https://www.circle.com/pressroom/circle-announces-acquisition-of-hashnote-and-usyc-tokenized-money-market-fund-alongside-strategic-partnership-with-global-trading-firm-drw

"In the crypto markets there are no MMFs. But they have a close equivalent-private sector stablecoins. For cryptocurrency investors, traders and financiers, digital asset tokens like Tether (USDT) and Circle (USDC) perform the same function as dollar-pegged money market funds in the legacy system."

The Centre for Economic Policy Research (CEPR) posted an article by several Bank for International Settlement (BIS) and European Central Bank (ECB) staffers that explores the reactions of stablecoin capitalization and money market fund assets under management (AUM) to crypto-asset market and US monetary policy shocks. Following a crypto shock, the money market fund AUMs barely budge whereas stablecoin capitalization drops significantly. After a monetary policy tightening, prime money market fund AUMs rise while stablecoin market capitalization substantially declines. As monetary policy tightens, crypto prices fall, the market turns bearish, and investors demand less stablecoins for speculative purposes. This brings into question the role of stablecoins as a crypto safe haven from either crypto or monetary policy and traditional financial market shocks.