The IMF says large dollar stablecoins can accelerate currency substitution, weaken monetary control in fragile economies, and require strict, globally coordinated regulation and reserves.
Summary
- The IMF notes stablecoins top $300 billion, mostly dollar-pegged, and can leapfrog local banks and payment rails via smartphones and unhosted wallets.
- Widespread dollar stablecoin use could shift savings and payments offshore, blunting central banks’ control over liquidity, credit, and rates, especially in high-inflation states.
- The paper backs “same activity, same risk, same regulation,” calling for harmonized laws, strict reserve and redemption rules, and coordination to avoid shadow-banking-style risks.
The International Monetary Fund published a paper warning that large foreign-currency stablecoins can accelerate currency substitution and erode monetary control in weaker economies, according to a document titled “Understanding Stablecoins.”
Global stablecoin capitalization now exceeds $300 billion, with approximately 97 percent of outstanding tokens referencing the U.S. dollar, the paper stated. Influence is concentrated in issuers such as Tether and Circle, according to the IMF.
IMF pushes for stablecoins
The fund warned that foreign stablecoins can bypass domestic banks and payment rails, penetrating economies rapidly via the internet and smartphones. The use of foreign-currency tokens could lead to currency substitution and potentially undermine monetary sovereignty, particularly in the presence of unhosted wallets, the paper stated. The risk is most acute in countries with high inflation, weak institutions, or low confidence in the local currency, according to the IMF.
If a large share of domestic payments and savings migrates into dollar-denominated stablecoins, central banks lose traction over liquidity conditions, credit creation, and interest-rate transmission, the paper warned. Late-launched central bank digital currencies may struggle to displace private stablecoins once they achieve network effects in retail payments, cross-border remittances, and merchant settlement, the IMF stated.
On regulation, the IMF aligned with the G20 and Financial Stability Board by endorsing the “same activity, same risk, same regulation” principle. The paper called for harmonized legal definitions of stablecoins, strict reserve and redemption standards, granular disclosure of reserve composition and custody, and cross-border supervisory colleges to prevent issuers from exploiting jurisdictional gaps.
The IMF identified high-risk structures such as algorithmic or partially collateralized stablecoins, warning that runs on these tokens can transmit volatility into both crypto markets and local banking systems. The authors contrasted those designs with fully backed fiat-referenced coins that hold short-dated government securities and cash at regulated institutions, but flagged concentrated exposure to a single foreign currency as a macro-financial vulnerability for smaller states.
The paper noted fragmented regulatory frameworks across jurisdictions, stating that regimes such as the European Union’s Markets in Crypto-Assets (MiCA) regulation, Japan’s stablecoin framework, and various U.S. state-level regimes create scope for regulatory arbitrage. The IMF urged authorities to coordinate licensing, reserve rules, anti-money-laundering and countering the financing of terrorism requirements, and redemption rights to avoid a repeat of the “shadow banking” buildup that preceded the 2008 financial crisis.
Without consistent global regulation, stablecoins could bypass national safeguards, destabilize vulnerable economies, and transmit financial shocks across borders at high speed, the paper stated.
The publication follows several country-level consultations in which IMF staff raised concerns about unregulated dollar stablecoin usage in Latin America, Sub-Saharan Africa, and parts of Eastern Europe, according to the fund.
The paper framed dollar stablecoins as a monetary sovereignty issue rather than a niche payments product, placing major dollar stablecoins in the same policy conversation as capital controls, foreign-exchange intervention, and central bank digital currencies, the IMF stated.
