IMF warns stablecoins could accelerate currency substitution
The International Monetary Fund has warned that stablecoins may accelerate currency substitution in countries with fragile monetary systems, weakening central banks’ ability to control capital flows and maintain currency stability.
In its new report, “Understanding Stablecoins,” the IMF stressed that the risks are particularly high in economies with high inflation, low trust in banks, and unstable monetary policy.
The Fund says the rapid expansion of dollar stablecoins and their ease of use in cross-border payments make them a natural substitute for weak local currencies. The report notes that households and businesses in such countries may turn to dollar stablecoins for savings and transactions, accelerating the erosion of national currencies.
The IMF warns that stablecoins can circumvent capital controls and increase volatility in capital flows. Their use through unlicensed wallets and cross-border platforms complicates macroeconomic data collection and hinders regulatory oversight. The Fund states explicitly that this structure could fragment payment systems unless networks become interoperable.
The stablecoin market has grown to significant scale. According to the report, the combined supply of USDT and USDC has tripled since 2023 to $260 billion, while trading volumes reached $23 trillion in 2024. Asia is the largest region for stablecoin usage, though Africa, the Middle East, and Latin America lead relative to GDP.
The IMF also notes potential benefits: stablecoins can broaden access to financial services in developing economies where mobile payments already surpass traditional banking. With robust legal frameworks, they can lower transaction costs and enhance competition.
Even so, macrofinancial risks remain substantial. The most severe scenario, the Fund says, is a run on stablecoins — when issuers lose liquidity and rapidly liquidate reserves, potentially triggering broader market turmoil.
Regulation remains fragmented. The IMF compared the approaches of the US, EU, UK, and Japan and found major differences in issuer requirements, reserve rules, and the treatment of foreign firms. The Fund argues that this divergence creates opportunities for regulatory arbitrage and weakens oversight.
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