The International Monetary Fund (IMF) has recently released a report titled " Understanding Stablecoins, " revealing the significant impact stablecoins have on the global financial system. These impacts include accelerating the "digital dollarization" of countries with high inflation and weak institutions, and weakening central banks' control over capital flows, exchange rates, and monetary policy. While stablecoins have the potential to improve payment efficiency and financial inclusion, bank runs, reserve asset sell-offs, and fragmented regulation are posing increasing systemic risks, prompting the IMF to urge countries to take swift action.
Making the dollar great again? Stablecoins are quietly eroding global monetary sovereignty.
The IMF report points out that stablecoins’ cross-border accessibility, low barriers to entry, and high liquidity make them an alternative option for many emerging markets facing high inflation, exchange rate instability, and institutional trust breakdowns.
Data shows that 97% of stablecoins are denominated in US dollars, accelerating the global digitalization of the dollar, weakening the regulatory capacity of some countries, and making it more difficult for central banks to track the flow of funds.
The IMF warns that this trend will not only reduce tax revenues in countries but will also directly undermine the transmission mechanism of monetary policy: "If a country's currency loses its use cases, its sovereignty begins to erode."
What are the risks of stablecoins? A run on stablecoins and a sell-off of government bonds could trigger a chain reaction in the financial markets.
The IMF points out that although stablecoins are called "stable", they still harbor many significant risks, especially in terms of the authenticity of reserves, transparency and financial complexity.
The report shows that USDT and USDC reserves include short-term U.S. Treasury bonds, repurchase agreements secured by U.S. Treasury bills, and bank deposits, with the former two accounting for more than 80%.
The IMF emphasizes that once market confidence cracks, it could trigger:
Massive redemptions: Holders rush to sell or redeem physical fiat currency.
Issuers were forced to sell off US Treasury bonds, causing sharp fluctuations in short-term Treasury yields.
Repo Market Failure: Impacting Global Liquidity and Financial Institutions' Funding Costs
The IMF stated bluntly that without strict regulation and risk buffers, stablecoins could become one of the triggers for a systemic financial crisis.
Advantages despite risks: Financial inclusion and payment innovation brought about by stablecoins
Despite the significant risks, the IMF also acknowledges the potential value of stablecoins. According to the report, stablecoins are expected to create significant benefits in the following areas:
Reduce cross-border remittance and transaction costs
Improving payment accessibility for the unbanked population
Strengthen the settlement environment for cross-border e-commerce and independent businesses
Becoming a key payment medium for future tokenized assets
Furthermore, when combined with smart contracts, stablecoins help achieve "atomic settlement," allowing transactions and payments to be completed simultaneously, reducing counterparty risk and improving efficiency.
However, the IMF points out that these benefits depend on the establishment of a secure, interconnected, and transparent institutional framework globally.
Regulatory fragmentation: the US, Europe, Japan, and the UK each take their own path.
On the other hand, the cross-border nature of stablecoins also makes regulation a common global challenge. The IMF, after comparing major jurisdictions, pointed out:
The IMF emphasizes that this highly fragmented regulation in terms of region and authority will allow regulatory arbitrage to continue, enabling risks to circulate between countries and undermining overall effectiveness.
IMF Summary: Stablecoins as Currency Alternatives and Regulatory Fragmentation Possess Potential Risks
At the end of the report, the IMF clearly stated: "Stablecoins will continue to exist, and their impact will depend on countries taking coordinated regulatory action and ensuring the credibility of their currencies and institutions."
The IMF's core policy recommendations to governments include:
Strengthen its own macroeconomic policies and monetary system
Maintain the effectiveness of capital flow management measures
Establish clear legal identity, reserve regulations, and redemption rights.
Strengthening Anti-Money Laundering (AML) and Financial Transparency
Establish a cross-border regulatory coordination framework
Promote CBDC or tokenized deposits to provide a secure alternative.
In summary, stablecoins are not the monsters that threaten everything; the real source of risk lies in their fragile systems and lack of cooperation.
This article, "IMF Warning: Stablecoins Threaten the Monetary Sovereignty of Weak Countries, Regulatory Fragmentation Poses Potential Risks," first appeared on ABMedia, a ABMedia .
