Stablecoins: Promise, Risks, and Policy Choices for Emerging Markets

IMF News, August 7, 2026

Source details

Canonical URL: Stablecoins: Promise, Risks, and Policy Choices for Emerging Markets

Other formats

Bibliographic details

Published: August 7, 2026

I. Overview / Landscape: what we know

Stablecoins remain modest in size relative to the financial system: market capitalization nearly tripled between 2021 and 2025 but has remained relatively flat over the last year at around $300 billion.
Currency composition and reserves:
- Nearly 99 percent of stablecoins are denominated in U.S. dollars.
- Reserves are largely held in short-term T-bills and reverse repos; some issuers use less liquid and riskier backing assets.
Transaction volumes and payment-related activity:
- According to some sources, total stablecoin transaction volume exceeded $30 trillion in 2025, of which $6.1 trillion was cross‑border.
- The Bank for International Settlements estimates $390 billion in payment-related stablecoin flows in 2025.
- The global cross-border payments market is estimated at around one quadrillion U.S. dollars annually.
Usage patterns and ecosystem drivers:
- Much market activity remains within the crypto ecosystem and is driven by bots and algorithmic arbitrage.
- Stablecoins are part of a broader trend toward tokenization (tokenized deposits, money market funds, securities, tokenized central bank reserves).
- Potential benefits: lower reconciliation costs, programmability, atomic settlement, competition in payments, potential to reduce remittance costs.
- Forthcoming IMF research indicates the end‑user cost of stablecoins can be significantly cheaper than the current average global remittance cost of 6.5 percent, though savings are not uniform across corridors due to on/off‑ramp fees and exchange rate differences (the “stablecoin premium”).
- Advances in artificial intelligence may accelerate stablecoin adoption because of programmability and suitability for agentic AI.

II. What stablecoins mean for emerging markets

Core channel of concern: more frictionless access to foreign currency (particularly U.S. dollar‑denominated assets) via digital wallets; potential extension to local transactions.
Key cross-cutting points:
- Impact depends on country circumstances: strength of macro frameworks, prevalence and form of currency substitution, financial market structure, availability of local‑currency stablecoins.
- Competitive responses from incumbent financial institutions could still deliver lower costs and greater efficiency even if stablecoin adoption is limited.

II.A. Risks from local‑currency stablecoins

Policy intention: jurisdictions may promote local‑currency stablecoins to channel demand away from FX stablecoins.
Practical issues:
- Low demand for local‑currency stablecoins (example: South Africa — dollar‑based stablecoins limited traction; Rand‑linked stablecoins have seen even less demand) may reflect user preference for dollar liquidity, network effects, and cross‑border acceptance.
- When local‑currency and FX stablecoins coexist on the same blockchain, conversion becomes on‑chain (decentralized exchanges, liquidity pools, peer‑to‑peer swaps), reducing reliance on traditional intermediaries and policy levers tied to regulated banks and FX dealers.
- Local‑currency stablecoins on shared infrastructure could therefore accelerate FX stablecoin adoption and weaken the effectiveness of on‑ramp/off‑ramp regulation.

II.B. Dollarization dynamics

Stablecoins can amplify familiar dollarization forces driven by high inflation, exchange‑rate volatility, institutional fragility, and weak credibility.
Consequences:
- Households and firms use dollarization to protect against inflation and depreciation; currency competition can also strengthen incentives for sound policymaking.
- Dollarization is persistent; stablecoin‑driven substitution could spread faster than historical channels due to smartphones and messaging apps.
- Stablecoins may facilitate circumvention of capital flow management measures (CFMs) designed for regulated intermediaries, potentially amplifying outflows and stressing exchange rates and financial stability.
- Large inflows into FX stablecoins can create a parallel market where stablecoin prices deviate from spot FX; forthcoming IMF research shows the cost of sending $200 using stablecoins varies between negative 2 percent to 8 percent depending on the corridor, reflecting a “stablecoin premium” in some markets.
- Shifts in intermediation (e.g., FX holdings shifting from domestic banks to reserve investments abroad such as U.S. Treasury bills) can tighten domestic credit conditions and increase vulnerability of FX deposit funding.

II.C. Dollarization across country contexts

Highly dollarized economies:
- Stablecoins likely substitute for existing FX forms; impact on overall foreign currency demand should be relatively limited.
- Substitution of physical dollars into stablecoins can yield benefits (utility, de‑shadowing) with limited macro risk.
- Where stablecoins draw from FX deposits, intermediation shifts can reduce domestic FX lending capacity; yet clear evidence of disintermediation is limited (example: El Salvador — bank credit and deposits continue to expand).
Economies with limited access to dollars:
- Large repressed demand for dollars can lead to net increases in foreign currency holdings and higher dollarization if stablecoins penetrate.
- If stablecoins substitute for physical dollars in circulation, impact may be limited; if adoption shifts domestic financial assets to stablecoins, risks grow.
- Policy response depends on channels: adoption via domestic intermediaries should bring intermediaries under regulatory/supervisory scope; foreign intermediaries require cooperation with hosting authorities.
- Unhosted wallets pose legal and supervisory challenges; cross‑border cooperation and domestic enforcement become essential.
Open economies with strong macro frameworks:
- Foreign stablecoin adoption likely muted where repressed dollar demand is limited; benefits from competition and lower cross‑border costs may be realized with lower macro‑financial risk, though capital flow volatility could increase.

III. Policy implications and recommendations

Five suggested priorities for emerging‑market policymakers:
- First: Strengthen macro fundamentals.
- Credible monetary policy, sustainable fiscal positions, strong institutions, and well‑functioning domestic payment systems reduce demand for foreign‑currency stablecoins.
- Second: Close data gaps.
- On‑chain data is pseudonymous; activity in exchanges, OTC markets, and custodial wallets is largely invisible.
- Estimates of cross‑border stablecoin flows rely on differing assumptions.
- CFMs require calibrated data on volume and direction of flows.
- IMF, with G20 Data Gaps Initiative partners, is developing and disseminating best practices; example: South African Reserve Bank compiled custody data and is drafting a Crypto Asset Manual.
- Data collection should proceed even before perfect regulation; reporting requirements embedded in robust legal and regulatory frameworks are critical.
- Third: Revise the policy toolkit.
- Existing CFMs designed for traditional financial institutions are insufficient.
- Need comprehensive regulation, supervision, and oversight of crypto‑asset activities: exchanges, on‑ and off‑ramp providers, custodians, payment platforms.
- Reporting requirements for these entities reduce data gaps and support monitoring necessary for effective CFMs.
- Fourth: Tailor policy responses to adoption channels.
- If stablecoins substitute for existing FX holdings: prioritize managing intermediation shifts and bank funding risks with prudential tools.
- If stablecoins expand dollar access beyond existing frameworks: prioritize bringing stablecoins into the regulatory perimeter by extending CFM controls to on‑ and off‑ramps and on‑chain exchange points, especially where local‑currency and FX stablecoins coexist on the same infrastructure.
- Avoid one‑size‑fits‑all responses that could over‑ or under‑regulate.
- Fifth: Strengthen international cooperation.
- Stablecoins operate across jurisdictions while regulation remains largely national.
- Without cross‑border cooperation, activity will migrate to jurisdictions with weaker oversight or to unhosted wallets.
- Recent FSB and IOSCO reviews show gaps in cooperation mechanisms that must be addressed for effective supervision of global stablecoins and their service providers.

IV. The IMF’s role

Surveillance and analysis: deepening evidence on transmission channels and dollarization dynamics.
Capacity development: help countries adapt regulatory frameworks and policy toolkits; support improvements to cross‑border payment infrastructures, with a focus on the Southern African Development Community.
G20 Data Gaps Initiative: advocate embedding reporting in regulation.
Convening role: foster dialogue and cross‑jurisdiction cooperation.
Acknowledgement of uncertainty: stablecoins may never become a much larger force; competing institutions and instruments could adopt tokenization and outcompete stablecoins. Regardless, policymaking should aim to enable competition and innovation without undermining macroeconomic and financial stability.

Key statistics and empirical points (verbatim)

Market capitalization: around $300 billion.
Nearly 99 percent of stablecoins denominated in U.S. dollars.
Market capitalization nearly tripled between 2021 and 2025.
Total stablecoin transaction volume exceeded $30 trillion in 2025; $6.1 trillion cross‑border (per some sources).
BIS estimate: $390 billion in payment‑related stablecoin flows in 2025.
Global cross‑border payments market estimated at around one quadrillion U.S. dollars annually.
Average global remittance cost: 6.5 percent.
Forthcoming IMF research: cost of sending $200 using stablecoins varies between negative 2 percent to 8 percent depending on the corridor.

Remarks by Dan Katz, First Deputy Managing Director, "Stablecoins: Promise, Risks, and Policy Choices for Emerging Markets," University of Cape Town, August 7, 2026.