IMF Sounds Alarm on Stablecoin Threat to National Economies

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The International Monetary Fund issued a warning that stablecoins present a significant risk of accelerating currency substitution in nations with less robust monetary systems. This shift could fundamentally weaken central banks’ authority over domestic capital flows.

A new IMF report explains that the explosive growth of dollar-pegged stablecoins, due to their inherent ease of cross-border movement, may drive households and firms to ditch local currencies. This is considered particularly likely in environments already plagued by high inflation or where trust in local institutions is low.

The IMF specifically noted that these assets could undermine financial stability by circumventing established capital controls, increasing volatility in cross-border money movements. The institution also warned of potential fragmentation within payment systems unless strong interoperability between platforms is achieved.

These risks are detailed in a recent report and accompanying analysis, which highlight the staggering expansion of the stablecoin sector. The two leading stablecoins, USDT and USDC, have seen their combined value triple since 2023 to reach $260 billion, with annual trading volumes hitting $23 trillion in 2024.