## Technology, Payments, and the Rise of Stablecoins

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**Canonical URL:** [Technology, Payments, and the Rise of Stablecoins](https://www.imf.org/en/publications/fandd/issues/2025/09/editor-letter-technology-payments-stablecoins)

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## Bibliographic details
- Authors: GITA BHATT
- Published: September 3, 2025

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### Overview
- Technology, data, and changing societal values are reshaping how people and institutions move money and trade financial assets.
- This issue of F&D brings together academics and policymakers to assess innovations such as crypto assets and stablecoins, and their implications for payments, liquidity provision, and financial stability.
- Publication details in source: GITA BHATT, September 2025.

### Stablecoins: definition, adoption, and use cases
- Stablecoins are described as a form of digital asset backed by currencies or government bonds.
- Stablecoin companies have racked up millions of users globally, transacting across borders 24/7 at very low cost.
- Dollar-pegged stablecoins have become a financial lifeline for people in some economies with high inflation.

### Benefits and macroeconomic/geopolitical implications
- Potential benefits noted:
  - Faster and cheaper cross-border payments.
  - Expanded access to low-cost payment rails and financial services.
- Potential macroeconomic and geopolitical concerns (as assessed by Hélène Rey):
  - Risk of dollarization (where the dollar is used in parallel with the local currency).
  - Capital flows and exchange rate volatility.
  - Potential weakening of the banking system.
  - Money laundering and other financial crimes.
- Her assessment: widespread adoption of US dollar–denominated stablecoins is “likely to create major financial stability risks.”

### Market structure changes and sources of risk
- The global financial landscape has changed, yet the rules remain largely unchanged (Yao Zeng).
- Observed market-structure shifts:
  - Lightly regulated nonbanks are providing more liquidity.
  - Lenders increasingly rely on AI and big data to speed loan approvals, reduce collateral requirements, and reach borrowers traditional banks often overlook.
- Key risk assessment: “Stablecoins may function well in good times, but they can falter under stress.”

### Public-sector responses and large-scale payment systems
- Public and private sectors both drive innovation in payments.
- Some governments and central banks sponsor systems to meet consumer demand for fast, efficient payments.
- Case example from IMF research: India’s Unified Payments Interface interconnects hundreds of banks, platforms, and apps and carries out more than 19 billion transactions a month.

### Competition, incumbents, and new entrants
- New entrants (fintechs, big techs) and new products (crypto, stablecoins) challenge incumbent financial institutions.
- Iñaki Aldasoro, Jon Frost, and Vatsala Shreeti (Bank for International Settlements) conclude that forward-looking public policies must accompany radical innovation to achieve the most impactful breakthroughs.

### Crime, privacy, and regulatory trade-offs
- Criminals were among the earliest adopters of crypto, underscoring the need for vigilance.
- Payment systems must balance privacy and speed with preventing tax evasion, money laundering, and terrorism financing.
- Stanford’s Darrell Duffie and coauthors propose a practical approach to staying ahead of these risks.

### Policy recommendations and guiding principles
- Balance risks and benefits through clear regulation that:
  - Protects consumers and investors.
  - Limits spillovers to the broader financial system.
- Forward-looking public policies should accompany innovation to manage competition, financial stability, and systemic risks.
- Authorities should maintain openness to innovation while ensuring payment systems and financial markets improve in ways that protect users and the system.

### Other thematic contributions in the issue
- Topics highlighted in the issue include:
  - AI, centralization, and competition (Carl Benedikt Frey).
  - Geographic shifts in US start-up activity (Swati Bhatt).
  - Economic uncertainty measurement and implications (Nick Bloom; Hites Ahir; Davide Furceri).
  - Historical lessons from the 19th century on free trade (Marc-William Palen).
  - Profiles and interviews with leading economists (Guido Imbens; Stefanie Stantcheva).

*Source: Technology, Payments, and the Rise of Stablecoins — F&D Magazine, GITA BHATT, September 2025.*

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## Content in this bundle

- **Technology, Payments, and the Rise of Stablecoins**
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- **fd-september-2025**
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  - [fd-september-2025 (PDF)](/-/media/files/publications/fandd/article/2025/09/fd-september-2025.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/fandd/issues/2025/09/editor-letter-technology-payments-stablecoins_