Summary
– The IMF says global stablecoin market tops $300 billion, roughly 97% dollar-referenced, and can reach users directly via smartphones and unhosted wallets.
– Widespread use of dollar stablecoins could shift payments and savings offshore, weakening central banks’ control over liquidity, credit and interest-rate transmission, especially in high-inflation or weak-institution countries.
– The IMF backs “same activity, same risk, same regulation,” urging harmonized laws, strict reserve and redemption standards, transparent reserve disclosures, and cross-border supervisory cooperation to avoid shadow-banking risks.
The International Monetary Fund published a paper, “Understanding Stablecoins,” warning that large foreign-currency stablecoins can speed currency substitution and undermine monetary control in vulnerable economies. The report notes global stablecoin capitalization exceeds $300 billion and that about 97% of outstanding tokens reference the U.S. dollar, with market power concentrated among issuers such as Tether and Circle.
The IMF cautioned that foreign stablecoins can bypass domestic banks and payment rails, reaching consumers directly through internet-enabled devices and unhosted wallets. In countries with high inflation, low confidence in the local currency, or weak institutions, this can lead to significant currency substitution. If a large portion of domestic payments and savings migrates to dollar-denominated stablecoins, central banks may lose traction over liquidity conditions, credit creation, and interest-rate transmission. The paper also warned that central bank digital currencies launched late may struggle to displace private stablecoins once those tokens achieve network effects in retail payments, remittances and merchant settlement.
On regulation, the IMF aligns with the G20 and the Financial Stability Board’s “same activity, same risk, same regulation” principle. The paper recommends harmonized legal definitions of stablecoins, robust reserve and redemption rules, granular disclosure of reserve composition and custody arrangements, and cross-border supervisory colleges to prevent regulatory arbitrage by issuers seeking lenient jurisdictions.
The IMF identified high-risk designs—such as algorithmic or partially collateralized stablecoins—because runs on these instruments can transmit volatility into crypto markets and local banking systems. By contrast, fully backed fiat-referenced coins that hold short-dated government securities and cash at regulated institutions pose fewer immediate liquidity risks, though heavy reliance on a single foreign currency remains a macro-financial vulnerability for smaller states.
Regulatory frameworks are currently fragmented: examples include the EU’s Markets in Crypto-Assets (MiCA) regime, Japan’s stablecoin framework, and diverse U.S. state-level rules. The IMF urged coordination on licensing, reserve standards, anti-money laundering and countering the financing of terrorism requirements, and redemption rights to avoid a recurrence of the shadow-banking buildup that contributed to the 2008 crisis. Without consistent international rules, stablecoins could bypass national safeguards, destabilize vulnerable economies, and transmit shocks rapidly across borders.
The publication follows IMF staff consultations with countries reporting concerns about unregulated dollar stablecoin usage in Latin America, Sub-Saharan Africa and parts of Eastern Europe. The paper frames dollar stablecoins as a core monetary-sovereignty issue rather than a niche payments innovation, placing major dollar stablecoins in the same policy conversation as capital controls, foreign-exchange intervention and central bank digital currencies.
