IMF warns that stablecoins may weaken monetary sovereignty and recommends setting limits to prevent substitution risks

PANews reported on December 5 that the latest report "Understanding Stablecoins" from the International Monetary Fund (IMF) shows that US dollar-dominated stablecoins are rapidly penetrating emerging markets and developing economies, which may weaken the central bank's control over domestic liquidity and interest rates. The report points out that stablecoins can quickly enter the market through mobile phones and the Internet. Especially when unhosted wallets exist, they are more likely to cause "currency substitution", weaken the use of local currencies, and affect the central bank's monetary policy transmission and seigniorage revenue.

The IMF recommends that countries establish legal frameworks to prevent stablecoins from obtaining "legal tender" or "official currency" status, thereby safeguarding financial sovereignty. Currently, 97% of the total stablecoin market capitalization is pegged to the U.S. dollar, with only a small percentage tied to the euro or yen. The report also emphasizes that the use of stablecoins in cross-border payments and high-inflation countries has increased significantly, especially in Africa, the Middle East, and Latin America.

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