The International Monetary Fund (IMF) has released a report highlighting the rapid spread of dollar-pegged stablecoins in emerging and developing economies. This trend may weaken local central banks’ control over liquidity and interest rates. Stablecoins are increasingly accessible in these markets via mobile phones and the internet, particularly through non-custodial wallets, raising concerns about currency substitution. Currency substitution refers to the replacement of local currency with foreign currency, such as dollar-linked stablecoins, which can undermine monetary policy implementation and reduce central bank revenues. Currently, approximately 97 percent of stablecoin market value is linked to the US dollar, with minimal coins tied to the euro or yen. The report emphasizes that stablecoin usage is growing especially in countries experiencing high inflation, including regions in Africa, the Middle East, and Latin America. These currencies also play a significant role in cross-border payments, introducing new dynamics to the financial system. The IMF advises developing countries to establish legal frameworks to prevent stablecoins from gaining status as legal tender or official currency, thereby preserving financial sovereignty. The institution is assisting local governments in addressing this emerging financial challenge. The increasing popularity of stablecoins is beginning to impact traditional financial systems, and it remains to be seen how central banks will adapt their monetary policies to this evolving landscape.
Source: binance
