Crypto-exchange Run
Dr. Jiaqing ZENG
Research Assistant Professor in Finance
FBA, UM
Date: 13 April 2026 (Monday)
Time: 13:00-14:00
Venue: FBA Lobby
Abstract
We develop a global-games model of cryptocurrency exchange runs that highlights how network effects and balance-sheet design interact to drive fragility. Clients’ incentives depend on platform participation, while exchanges hold reserves partly in self-issued tokens whose value falls as users withdraw. This creates a feedback loop: withdrawals shrink the network, depress token prices, and weaken solvency.
In equilibrium, clients follow a threshold strategy. We show that higher reserve misallocation, aggressive yield offerings, and low equity increase run risk, consistent with recent exchange failures. Self-issued tokens amplify fragility relative to external assets. Profit-maximizing exchanges underinvest in stability, supporting capital requirements and restrictions on endogenous reserve assets.
About the speaker
ZENG Jiaqing obtained his Ph.D. degree in economics from Tsinghua University. His research focuses on both empirical and theoretical aspects of coordination failure.
All are welcome!
