IMF Warns Dollar Stablecoins Threaten weaker national currencies and stifle central bank control

The IMF just warned that fast-growing dollar stablecoins could hollow out weaker national currencies and stifle central bank control, while calling for stricter, globally coordinated rules that could upend today’s stablecoin market.

Here’s a summarised analysis of the IMF’s latest Stablecoin Report from the full report: https://www.imf.org/-/media/files/publications/dp/2025/english/usea.pdf

1. Dominant Use Case: Crypto Trading

• IMF confirms that roughly 80% of stablecoin transactions are linked to crypto trading, primarily for arbitrage and liquidity provision on exchanges.
• Automated bots dominate this activity, exploiting price discrepancies across platforms.
• This means stablecoins currently function more as market plumbing than as mainstream payment instruments.
• Implication: Their systemic importance is tied to crypto market volatility, not to retail adoption yet. [imf.org]

2. Cross-Border Payments Surge in EMs

• Stablecoins are increasingly used for remittances and trade settlement, especially in emerging markets where:
• Access to USD is limited.
• Banking infrastructure is weak or costly.
• IMF notes that Asia leads in absolute volume, while Africa, Latin America, and the Middle East show the highest flows relative to GDP.
• Remittance costs via traditional rails can reach 20%, making stablecoins attractive for cost reduction.
• Implication: This trend could accelerate digital dollarisation, challenging local monetary sovereignty. [imf.org]

3. Macroprudential Risks

• Fire-sale risk: Runs on stablecoins could force issuers to liquidate extensive holdings of short-term U.S. Treasuries, disrupting money markets.
• Capital flow volatility: Stablecoins can bypass capital controls, amplifying spillovers during crises.
• Currency substitution: Dollar-pegged tokens (≈97% of market) could erode monetary policy in fragile economies.
• Implication: These risks resemble those posed by shadow banking, but with faster contagion channels via digital rails. [coinspeaker.com]

4. Bank Disintermediation

• Stablecoins threaten banks’ deposit base:
• If households and firms shift liquidity into stablecoins, banks lose a key funding source.
• This could raise funding costs and increase reliance on wholesale markets.
• IMF warns that late CBDC launches may struggle to compete once stablecoins achieve network effects.
• Implication: Banks may need to adapt by integrating tokenised deposits or partnering with stablecoin issuers. [decrypt.co]

5. Privacy & AML Blind Spots

• Pseudonymity and cross-border interoperability gaps make AML/CFT enforcement difficult.
• Unhosted wallets and fragmented regulations create regulatory arbitrage opportunities.
• IMF calls for global coordination and “same activity, same risk, same regulation” principles, but notes progress is slow.
• Implication: Without harmonised standards, illicit finance risks remain high. [cointelegraph.com]

6. Additional Insights from IMF

• Market size: $300B+ capitalisation, dominated by USDT and USDC.
• Reserve composition: Heavy reliance on short-term U.S. Treasuries (USDT ≈75%, USDC ≈40%), linking stablecoins directly to traditional financial markets.
• Regulatory landscape: Fragmented across jurisdictions (U.S. GENIUS Act vs EU MiCA), creating liquidity silos and interoperability challenges. [cryptopolitan.com]

7. Strategic Takeaways

• For policymakers: Urgent need for harmonised global standards, reserve transparency, and cross-border supervisory colleges.
• For financial institutions: Explore tokenised deposits and CBDCs to mitigate disintermediation risk.
• For compliance teams: Prepare for stricter AML/CFT obligations and interoperability requirements.

Sources

• https://www.imf.org/en/publications/departmental-papers/issues/2025/12/02/understanding-stablecoins-570602
• https://www.imf.org/-/media/files/publications/dp/2025/english/usea.pdf
• https://www.imf.org/en/blogs/articles/2025/12/04/how-stablecoins-can-improve-payments-and-global-finance
• https://www.coinspeaker.com/imf-warns-dollar-stablecoins-threaten-monetary-policy/
• https://decrypt.co/350996/stablecoin-adoption-could-stifle-central-bank-control-imf-warns
• https://www.cryptopolitan.com/imf-sets-stablecoin-risk-principles/