The passage of the GENIUS Act for stablecoins in the United States has encouraged numerous stablecoin papers and posts. A key concern is what happens if something goes wrong. American Enterprise Institute (AEI) argues for a change in the FDIC rules. If a bank collapses holding stablecoin balances, then the FDIC deposit insurance claims of any stablecoin issuer should be subordinated to all other deposit holders. Circle’s de-pegging event, where the price dropped from $1 to 87.5 cents, draws attention to a major feature of the largest stablecoins – both USDC and Tether do not provide direct redemptions to retail stablecoin holders, but instead work via intermediaries. Another post from the MIT Digital Currency Initiative highlights that during Circle’s de-peg crisis it redeemed about $2 billion in stablecoins – but crucially, these redemptions were not equally accessible to all holders. “This suggests that the primary market peg presumably held for institutional clients, even as the secondary market peg for retail users broke. The divergence highlights the structural gap between the redemption rights for institutional accounts and retail users,” the authors wrote. The EU’s concerns about multi-jurisdiction stablecoins highlight an intuitive finding – if it’s easier to redeem, the run risk is higher. Apart from direct redemption, EU stablecoins will also be more prone to redemption pressure in a crisis because there are no fees for cashing out. The authors additionally suggest that gated redemptions, as proposed in the UK, are a good idea to reduce runs. Even where there is no direct redemption, such as with the two largest stablecoins USDC and Tether, there are different run risks. On the face of it, USDC looks like it has more desirable features. However, ease of redemption directly correlates with run risk. So more arbitrageurs mean easier redemption and elevated vulnerability to runs. Higher levels of liquid assets make the issuer more likely to allow more off-ramps, also increasing run risk. The researchers found another area where more arbitrageurs are beneficial – during normal times, the price of the stablecoin is more stable. These findings highlight a key trade off between price stability and financial stability.