IMF: Dollar Stablecoins Threaten Monetary Sovereignty

In a recent report, the International Monetary Fund warned that the growing use of dollar-pegged stablecoins allows residents in many emerging economies to move savings out of local currency and reduces central banks’ ability to set interest rates, manage exchange rates, enforce capital controls and maintain bank deposits. The IMF described the risk as “no longer hypothetical.”

The report estimates that about 97% of outstanding stablecoins reference the US dollar. That concentration means widespread use of these tokens often functions as adoption of the dollar rather than the adoption of a new domestic payment tool.

The IMF identified four channels through which stablecoins affect monetary policy: interest-rate transmission, exchange-rate management, capital-control enforcement and bank funding. Ratings firm Moody’s has flagged deposit erosion at banks in some emerging markets as customers move savings into dollar tokens, a shift that can reduce banks’ lending capacity.

Stablecoins differ from past episodes of dollar substitution in three main ways. First, access: a smartphone and a crypto wallet are often enough to acquire dollar-pegged tokens, removing the need for a foreign bank account or physical cash. Second, cross-border permeability: tokens move on public ledgers and payment rails that can bypass domestic banking systems and capital controls. Third, visibility: on-chain holdings are harder for central banks to monitor, so large shifts into foreign-pegged tokens may not appear in official foreign-exchange or banking statistics.

Issuance is concentrated among a small number of private firms and most stablecoins are tied to the US dollar. Issuers typically hold reserves in short-dated US government securities, so funds leaving a peso or naira deposit and entering a dollar stablecoin often end up funding US Treasury markets rather than domestic credit.

The IMF and other analysts point to higher exposure in parts of Africa, the Middle East and Latin America, where adoption rates are elevated and regulatory oversight is uneven. Advanced economies face different issues, including concerns that domestic payment systems could become dependent on foreign private dollars.

Governments have pursued several responses. Some jurisdictions have banned stablecoins, while others are developing central bank digital currencies or state-backed local-currency stablecoins. Many countries have moved to regulate and license issuers, requiring reserves, disclosures and authorization.

The IMF noted that regulating issuance can change how tokens are used, and that demand for dollar-pegged tokens often reflects households seeking a more stable store of value where local currency performance has been poor.