Studies from Washington University Further Understanding of Economics (Stablecoin reserve risk under the GENIUS Act: Evidence from the Silicon Valley Bank shock): Economics

2026 SEP 03 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Data detailed on agriculture have been presented. According to news originating from Washington University by NewsRx correspondents, research stated, “The July 2025 Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act establishes a U.S. regulatory framework for stablecoin reserves.”

Our news editors obtained a quote from the research from Washington University: “The Act is silent on whether non-bank issuers may hold balances at the Federal Reserve, an open question for account-access discretion. This paper studies how reserve composition affects peg fragility under the Act and how GENIUS-compliant reserve regimes compare with a Federal Reserve master-account extension in a calibrated counterfactual stress test. We extend the Diamond-Dybvig framework to a reserve portfolio of bank deposits, short Treasuries, and central-bank balances, and derive a fragility threshold that depends on reserve composition. A high-frequency SVB event study provides the direct reserve-risk calibration from USDC, which exhibits approximately 1260 basis points of peak abnormal deviation. DAI is not used to identify reserve-composition risk; it is analyzed separately as collateral-chain contagion through MakerDAO’s Peg Stability Module and exhibits a 1462-basis-point peak abnormal deviation. A calibrated Monte Carlo simulation then compares four reserve regimes: the pre-GENIUS status quo, GENIUS-compliant bank-deposit-heavy and Treasury-heavy variants, and a Federal Reserve master-account extension. Under severe stress, the GENIUS-compliant Treasury-heavy regime has a median peak peg deviation of 2.97 percent, compared with 5.85 percent under the pre-Act status quo. Under calibrated master-account assumptions, and conditional on the redemption-attenuation assumption, the Federal Reserve master-account extension has a median peak deviation of 1.03 percent, a model-implied 65 percent reduction relative to the closest GENIUS-compliant alternative.”

According to the news editors, the research concluded: “All simulated reductions are conditional on the SVB-calibrated stress window, reserve mix, liquidity access, redemption-attenuation/pass-through, rail-capacity, T-bill haircut, settlement-timing, and queueing/service-capacity assumptions specified below. The analysis is a structured reserve-risk stress test, not a historical causal estimate or a complete welfare ranking.”

For more information on this research see: Stablecoin reserve risk under the GENIUS Act: Evidence from the Silicon Valley Bank shock. International Review of Economics & Finance, 2026,110():105620. The publisher for International Review of Economics & Finance is Elsevier.

A free version of this journal article is available at https://doi.org/10.1016/j.iref.2026.105620.

Our news journalists report that additional information may be obtained by contacting Hongzhe Wen, Washington University, United States of America. Additional authors for this research include Songbai Li, R.S.M. Lau, Jamie Zhang.

(Our reports deliver fact-based news of research and discoveries from around the world.)