Crypto-related innovations could reshape key elements of the U.S. financial system and impact its overall stability, according to a May 29 release from the Federal Reserve Bank of Boston. These topics were explored at the Third Conference on Stablecoins and Tokenization, organized by the Federal Reserve Banks of Boston and New York on May 22.
Researchers presented work examining how stablecoins interact with bank deposits and traditional foreign exchange markets during the virtual event. Kenechukwu Anadu, vice president at the Boston Fed, co-organized the conference with Marco Cipriani, deputy research director of the New York Fed. Anadu said during his opening remarks that “financial innovation has accelerated rapidly since the conference debuted in 2024, and those innovations raise important questions for discussion.” He continued: “For example, how might these digital cash-like products interact with the traditional financial system? How do we foster innovation (while) continuing to promote consumer health and financial stability?”
Tobias Adrian, financial counsellor and director at the International Monetary Fund’s Monetary and Capital Markets Department, delivered a keynote address describing tokenization as a significant shift in finance’s architecture. Adrian said blockchain technology allows assets to be represented digitally as a public shared record—a “single, synchronized source of truth.” He also noted that automated contracts could introduce new risks: “Long-term success, of course, depends on whether digital finance will gain the public trust.” Adrian discussed stablecoins’ rapid spread in emerging markets but warned their adoption could destabilize local currencies.
Gary Gorton, professor emeritus at Yale School of Management, addressed recent turmoil known as “crypto winter” when major platforms like FTX collapsed between 2021–2022. Gorton said this “cascade of failures” did not affect broader economic stability because lending activity was mostly internal within crypto platforms. However, he noted that two banks converting cryptocurrencies into fiat currency failed in 2023; replacement institutions may face similar risks unless more is done to address systemic vulnerabilities.
Alexandros P. Vardoulakis from the Federal Reserve Board presented research showing that even fully backed cryptocurrencies can experience runs due to rising transaction fees when networks become congested. The authors wrote: “Stablecoins, tokenized deposits, tokenized Treasuries, and central bank digital currencies issued on permissionless blockchains would all be exposed to the mechanism we document regardless of the safety of their backing.”
Cipriani concluded by thanking participants: “We plan to do (this conference) again next year, and we look forward to seeing all of you back here,” he said.
The Federal Reserve Bank of Boston operates as part of the U.S. Federal Reserve System; it supports community revitalization through economic research across six New England states while fostering economic stability nationwide through monetary policy formulation by monitoring local conditions, according to its official website. Susan Collins has led as President and CEO since July 2022.
