2023 SEW-EURODRIVE Student Award
Are stablecoins actually stable? Former MSc MTEC student Alexander Magnússon has been awarded a 2023 Student Award by the SEW-EURODRIVE Foundation for his Master’s thesis, which explores the stability of stablecoins. His thesis presents a framework that can be used to analyse the issuance of stablecoins backed by risky collateral, offering valuable insights into their stability and potential in the evolving crypto market.
external page Alexander Magnússon wrote his Master’s thesis, titled “Can Stablecoins be Stable?”, under the supervision of Professor Hans Gersbach and Dr Hugo Jozef van Buggenum at the D-MTEC Chair of Macroeconomics: Innovation and Policy. In it, he extends a model developed by his supervisors and Dr Sebastian Zelzner, introducing uncertainty in the returns of stablecoins to the model.
Stablecoins are a subset of cryptocurrencies designed to maintain a constant price tied to an underlying asset, most commonly the US dollar. They are thus the cryptocurrency that most closely resembles money. They have surged in popularity over recent years, driven by the rise of blockchain technology and the expanding cryptocurrency ecosystem, and many market participants are now convinced of their safety.
Alexander applies his model to stablecoins that may not be as safe as some suppose. “The findings of my thesis underscore the crucial role of holding safe, liquid, short-maturity assets as collateral for stablecoins, in order to mitigate the risk of runs,” he says. “Further, the results of my thesis advocates for regulations such as an investment rule to help protect coinholders from runs.” He notes that similar tools have already been implemented for money market funds, in the form of liquidity fees and redemption gates.
Alexander, currently a Capital & Financial Planning Graduate at Swiss Re, joined the MSc MTEC programme in 2021 and graduated in 2023.
“I chose the MSc MTEC programme for its combination of technical and industry expertise, in addition to the ability it gave me to tailor my studies based on my own interests. The programme gave me a great foundation for future success, both in technical skills and in qualitative skills such as critical thinking.”Alexander Magnússon, MSc MTEC Graduate
The 2023 SEW-EUROPREIS Student Award includes prize money of 2,500 euros. It was awarded to 17 students as recognition of their outstanding Diploma and Master’s theses and was announced in a ceremony held on 17 May 2024 in Graben-Neudorf Bruchsal in Germany.
The MTEC Department congratulates Alexander Magnússon on this award.
SEW-EURODRIVE Foundation Student Award
The Student Award is presented annually by the SEW-EURODRIVE Foundation to students from the subject areas of electrical and mechanical engineering, management, and economics. In addition to the quality of the thesis content and its academic value, factors such as an appropriate timeframe and the linking of different disciplines are key selection criteria. The award comes with a cash prize of 2,500 euros.