Beijing Institute of Mathematical Sciences and Applications

Johansson Anders , Ruize Gao , Liyan Han , Zhen Li , Jin Liu , Fei Long , Dongbo Shi , Ke Tang , Xing Yan , Qi Zhang

Shujie Wang

Friday, June 26, 2026 3:00 PM - 4:00 PM

A3-2-303

Zoom 435 529 7909 (BIMSA)

Stablecoin markets often rely on secondary-market arbitrage to maintain parity with their reference assets. When prices fall below par, arbitrageurs can buy discounted stablecoins and redeem them at face value, helping restore the peg. This paper argues that this stabilizing mechanism is fragile because arbitrage depends on redemption credibility. When confidence deteriorates, redemption channels become congested, or reserves cannot be converted quickly into cash, arbitrageurs may withdraw or even add selling pressure, turning a stabilizing force into a run amplifier. We develop a three-period equilibrium model with stablecoin holders, arbitrageurs, an issuer, and a regulator. Holders value the payment and settlement services of stablecoins but may redeem or sell when confidence weakens. Without external liquidity support, the market may exhibit both low-redemption and high-redemption run equilibria. Once redemption demand exceeds immediate liquidity capacity, redemption credibility falls, arbitrage weakens, discounts widen, and further redemption incentives arise. We then analyze a regulatory liquidity support mechanism combining central-bank reserves, a stability fund, and collateralized liquidity facilities. This mechanism raises redemption credibility without providing unconditional bailouts. The analysis highlights that stablecoin regulation should focus not only on reserve sufficiency, but also on the liquidity capacity and credibility of the redemption mechanism.

Shujie Wang is a PHD student at BIMSA and UCAS. Her research interests includes digital economy, empirical asset pricing, and data asset pricing.