{ "title": "Stablecoins, Tokens, and Global Dominance", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey", "canonical": "https://www.imf.org/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey", "overlayPath": "/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/index.md", "summary": "Technology is reshaping capital flows and currency dominance; data integrity is essential for financial stability", "sections": [ { "heading": "Overview", "content": "- Technology is poised to shake up the international monetary and financial system; outcomes depend on whether the public sector shapes standards or the private sector sets them first, as well as on regulations, international cooperation, and resilience to cyber risk.\n- Effects on capital flows could be large and include impacts on fiscal accounts, geoeconomic fragmentation, exchange rate volatility, and the internationalization of major currencies.\n- Stablecoins and tokenization are central innovations: stablecoins bridge conventional finance and crypto; tokenization records claims on assets on programmable platforms (Agur and others 2025)." }, { "heading": "Implications of stablecoins", "content": "- Stablecoins promise stable value relative to fiat currencies by holding liquid assets such as US Treasuries and operate on blockchains.\n- Features and current patterns:\n - Share similarities with money market funds and “narrow banking” (100 percent reserve banking), though typically do not offer interest payments.\n - Almost all stablecoins are pegged to the US dollar, but most transactions occur outside the United States.\n - Used as on- and off-ramps to crypto assets (often for speculative investments) and increasingly as a cross-border payment instrument.\n - Useful where domestic financial systems are weak, costly, or where international transactions are regulated (capital controls or sanctions).\n- Potential negative consequences:\n - Dollarization and its side effects; financial stability risks; hollowing out of the banking system; currency competition and instability; money laundering; fiscal base erosion; privatization of seigniorage; intense lobbying.\n- Potential positive consequences:\n - Quicker and cheaper cross-border payments, which matter for remittances.\n - Citizens in poorly governed countries could gain access to more stable and convenient means of payment and stores of value.\n- Who controls payment data and the implications for US dominance in sanctions enforcement are key governance questions." }, { "heading": "Capital flows and intermediation", "content": "- US dollar stablecoins may inherit network externalities and credibility from the dollar, enabling global medium-of-exchange use.\n- They can supersede correspondent banking and messaging systems such as SWIFT, potentially speeding and lowering the cost of cross-border transactions.\n- Cost reductions may partly reflect weak know-your-customer and anti–money laundering compliance if regulators lag.\n- Stablecoins are attractive for evading sanctions and facilitating illegal transactions; they can erode tax bases by channeling illicit or sanctioned flows.\n- Systemic risks and banking impacts:\n - Massive worldwide use of US dollar stablecoins could hollow out banking sectors via deposit competition.\n - Bank-issued stablecoins could curb lending and increase US Treasury holdings on bank balance sheets, resembling narrow banking.\n - Run risks exist if backing is questionable; monetary policy transmission and macroeconomic stabilization could be impaired by dollarization." }, { "heading": "Privatization of seigniorage", "content": "- Wide adoption of US dollar stablecoins for payments would amount to privatization of seigniorage by global private actors.\n- Fiscal and balance-sheet effects:\n - Increased international adoption of dollar-backed stablecoins could lower demand for non–US government bonds and raise demand for US Treasuries.\n - The magnitude depends on substitution patterns between dollar-backed crypto assets and money market funds and deposits in local currencies and dollars.\n - Tether and USDC already hold collectively more US Treasuries than Saudi Arabia (as shown in Chapter 2 of the IMF’s July 2025 External Sector Report).\n - Growing demand for Treasuries and US external safe liabilities could reinforce the “world banker” balance sheet of the United States and stabilize US finances and external deficits.\n- Political economy implications:\n - Significant wealth accumulation by a few companies and individuals due to network externalities, leading to increased lobbying for deregulation and opacity.\n - Threats to public goods and national macroeconomic policy imply measuring crypto flows, use, and regulation is a policy priority (Reuter 2025; Cardozo and others 2024).\n - Data collection on crypto capital flows by international organizations and country authorities is still in its infancy." }, { "heading": "Tokenization and integration", "content": "- Tokenization could unify messaging, reconciliation, and asset transfer on a single ledger where CBDCs also play a role.\n- Potential system changes:\n - Different countries’ CBDCs could be linked for efficient cross-border transactions (Bank for International Settlements view).\n - A blockchain that moves money, assets, and information securely and automatically could reshape global capital flows.\n- Access and market structure:\n - Interoperability and new trading platforms for global assets (stocks, bonds, commodities) could open access for individual investors anywhere.\n - Decentralized finance (DeFi) platforms could amplify peer-to-peer benefits by cutting out intermediaries such as banks and brokers.\n - Tokenization may expand financial integration while introducing well-known challenges." }, { "heading": "Currencies and financial stability", "content": "- Greater substitutability across currencies could increase competition and induce large portfolio shifts across currency networks.\n- Forces at play:\n - Increasing returns to scale and potential push toward a single unit of account; the incumbent dollar has a head start.\n - Strategic value of payment data and sovereignty concerns may fuel fragmentation and restrictions on some currencies.\n - Programmable capital controls and granular restrictions on wallets are possible; a more multipolar international monetary system could follow.\n- Fragility risks:\n - Multiple connected networks and proliferating private issuers could fracture monetary and financial systems.\n - Private monies historically are unstable without sovereign backing and credibility, leading to runs when unregulated.\n - Sovereign currencies may also be unstable if fiscal institutions lose credibility.\n- International policy cooperation and regulation are essential to prevent excessive fragmentation and financial fragility." }, { "heading": "Integrity privilege and cyber risks", "content": "- Loss of data integrity (for example, via quantum computing threats) could produce greater instability and confidence crises.\n- Security concerns:\n - The US Commerce Department’s National Institute of Standards and Technology warned in 2016 that quantum computers may soon solve problems conventional computers struggle with.\n - Fusa (2023) emphasizes quantum computers will be able to break many public key cryptosystems currently in use.\n - Development of post-quantum cryptography (secure against quantum and classic computers and interoperable with existing protocols) is progressing but outcome is uncertain.\n- Implications:\n - Currency networks most exposed to hacking and loss of integrity could suffer massive confidence crises and capital outflows, potentially triggering financial crises.\n - The currency network with the smallest attack surface should harvest a premium and reduce financing costs—termed an “integrity privilege.”" }, { "heading": "Conclusions and policy priorities", "content": "- The technological impact on the international monetary and financial system will be profound but hard to forecast; shaped by unpredictable innovations, regulatory policies, and lobbying groups.\n- Likely risks and outcomes:\n - Major financial stability risks, including increased exchange rate volatility and threats to public finances in many economies.\n - Competition across currency networks and large wealth transfers that will alter the political economy of regulation.\n- Policy priorities:\n - International policy cooperation and regulation are essential to mitigate fragmentation and financial fragility.\n - Measuring crypto flows, use, and global regulation should be a policy priority given threats to core macroeconomic policies and financing of national and global public goods.\n\nSource: Stablecoins, Tokens, and Global Dominance; HÉLÈNE REY; F&D Magazine; September 2025.\n\n---\n\n Content in this bundle\n\n- Stablecoins, Tokens, and Global Dominance\n - Stablecoins, Tokens, and Global Dominance (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Stablecoins, Tokens, and Global Dominance (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/bundle-manifest.json)", "Authors: HELENE REY", "Published: September 3, 2025", "Technology is poised to shake up the international monetary and financial system; outcomes depend on whether the public sector shapes standards or the private sector sets them first, as well as on regulations, international cooperation, and resilience to cyber risk.", "Effects on capital flows could be large and include impacts on fiscal accounts, geoeconomic fragmentation, exchange rate volatility, and the internationalization of major currencies.", "Stablecoins and tokenization are central innovations: stablecoins bridge conventional finance and crypto; tokenization records claims on assets on programmable platforms (Agur and others 2025).", "Stablecoins promise stable value relative to fiat currencies by holding liquid assets such as US Treasuries and operate on blockchains.", "Features and current patterns:", "Potential negative consequences:", "Potential positive consequences:", "Who controls payment data and the implications for US dominance in sanctions enforcement are key governance questions.", "US dollar stablecoins may inherit network externalities and credibility from the dollar, enabling global medium-of-exchange use.", "They can supersede correspondent banking and messaging systems such as SWIFT, potentially speeding and lowering the cost of cross-border transactions.", "Cost reductions may partly reflect weak know-your-customer and anti–money laundering compliance if regulators lag.", "Stablecoins are attractive for evading sanctions and facilitating illegal transactions; they can erode tax bases by channeling illicit or sanctioned flows.", "Systemic risks and banking impacts:", "Wide adoption of US dollar stablecoins for payments would amount to privatization of seigniorage by global private actors.", "Fiscal and balance-sheet effects:", "Political economy implications:", "Tokenization could unify messaging, reconciliation, and asset transfer on a single ledger where CBDCs also play a role.", "Potential system changes:", "Access and market structure:", "Greater substitutability across currencies could increase competition and induce large portfolio shifts across currency networks.", "Forces at play:", "Fragility risks:", "International policy cooperation and regulation are essential to prevent excessive fragmentation and financial fragility.", "Loss of data integrity (for example, via quantum computing threats) could produce greater instability and confidence crises.", "Security concerns:", "Implications:", "The technological impact on the international monetary and financial system will be profound but hard to forecast; shaped by unpredictable innovations, regulatory policies, and lobbying groups.", "Likely risks and outcomes:", "Policy priorities:", "**Stablecoins, Tokens, and Global Dominance**" ], "related": [ { "title": "Stablecoins, Tokens, and Global Dominance", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2025/09/rey.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2025/09/rey.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2025/09/rey.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/index.md", "json": "/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/index.json", "bundleManifest": "/en/publications/fandd/issues/2025/09/stablecoins-tokens-global-dominance-helene-rey/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T20:05:15.831Z" }