Finance and Economics Discussion Series (FEDS)
January 2026
A Framework for Understanding the Vulnerabilities of New Money-Like Products
Kenechukwu Anadu, Patrick McCabe, JP Perez-Sangimino, and Nathan Swem
Abstract:
New money-like products, such as tokenized money market funds (MMFs), money market exchange-traded funds (MMETFs), and stablecoins, could be transformative for finance. These products may offer significant benefits, but like other money-like assets, they also have certain vulnerabilities. We introduce a framework to analyze the vulnerabilities of new products by comparing their features to those that contribute to vulnerabilities in MMFs. Specifically, we examine the extent to which each product engages in liquidity transformation, is subject to threshold effects, serves as a money-like asset, poses contagion risks, and has reactive investors. Our framework is useful for assessing the potential effects of novel cash-like products on the overall resilience of the financial system and how such an assessment may change as these products’ uses evolve.
Keywords: money market funds (MMFs), stablecoins, tokenized money market funds, money market exchange-traded funds (MMETFs), financial stability, liquidity transformation, private money-like assets, moneyness, contagion, reactive investors, thresholds
DOI: https://doi.org/10.17016/FEDS.2026.002
PDF: Full Paper
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