TLDR
- IMF cautions USD-pegged stablecoins could lead to currency substitution and undermine local currencies in emerging markets.
- Stablecoins might bypass capital flow management (CFM) measures, enabling capital flight and exacerbating economic instability.
- Experts argue the stablecoin market is still too small to cause significant disruption in global finance or emerging markets.
- Stablecoin market cap reached $264 billion in 2023, but it remains dwarfed by the global financial system and the U.S. dollar’s dominance.
- Stablecoins are growing in emerging markets, particularly for payments and savings in regions with high inflation or currency instability.
The IMF has raised concerns about USD-pegged stablecoins, highlighting their potential risks to emerging markets (EMs). In its December 2025 report, the IMF warned that these stablecoins could encourage currency substitution and capital outflows. However, experts argue that the stablecoin market remains too small to have a large-scale macroeconomic impact.
Stablecoins Could Undermine Local Currencies
The IMF report highlights the threat of stablecoins to local currencies in emerging markets. Stablecoins, particularly those pegged to the U.S. dollar, could lead to currency substitution, where local currencies are replaced by dollar-pegged tokens. This shift could reduce the control central banks have over monetary policy in countries with high inflation and unstable currencies.
The IMF also expressed concern that stablecoins could bypass capital flow management (CFM) measures. These measures are designed to regulate cross-border financial flows and prevent capital flight. The IMF warns that stablecoins could be used to circumvent these controls, accelerating outflows in times of economic distress.
“Stablecoins could undermine the effectiveness of CFMs,” the IMF stated in the report. It further noted that stablecoins facilitate capital flight, which can destabilize economies already facing high inflation or weak financial systems. The ability to move capital quickly and freely through stablecoins might exacerbate macroeconomic instability during crises.
Stablecoin Market Size Still Too Small for Major Impact
Despite these concerns, experts agree that the stablecoin market has not yet grown large enough to cause major disruptions. Noelle Acheson, a crypto analyst, pointed out that the stablecoin market is still small compared to global currency flows. In 2023, the total market cap of the leading stablecoins, such as USDT and USD Coin (USDC), reached approximately $264 billion.
While this is a substantial amount, it pales in comparison to the global financial system. The U.S. dollar’s total monetary base far exceeds the combined market cap of stablecoins, making the dollar deeply entrenched in global finance. David Duong, head of institutional research at Coinbase, also emphasized the limited scale of stablecoins. He explained that while stablecoins can influence currency behavior in some markets, their overall impact is still minor.
Stablecoins See Growth in Emerging Markets
The IMF’s report noted that stablecoin usage has been growing in emerging markets, particularly in regions with high inflation or unstable currencies. Data shows that stablecoin cross-border flows have already surpassed those of unbacked cryptocurrencies like Bitcoin. Despite the small overall market share, stablecoins are increasingly used for payments and savings in certain developing regions.
Asia-Pacific leads the volume of stablecoin transactions, followed by North America. However, when scaled to GDP, emerging markets in Africa, Latin America, and the Caribbean show higher levels of stablecoin usage. These regions rely on stablecoins to access dollar-pegged stability and make cross-border payments. In these areas, stablecoins have become an alternative to traditional banking systems, where access to foreign exchange can be restricted.
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Source: https://blockonomi.com/imf-raises-red-flags-over-usd-pegged-stablecoins-in-emerging-markets/