## Stablecoins and Fragility in Fixed Exchange Rate Regimes

_IMF Working Papers, July 10, 2026_

## Source details

**Canonical URL:** [Stablecoins and Fragility in Fixed Exchange Rate Regimes](https://www.imf.org/en/publications/wp/issues/2026/07/10/stablecoins-and-fragility-in-fixed-exchange-rate-regimes-577641)

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## Bibliographic details
- Authors: Brandon Joel Tan
- Published: July 10, 2026
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229053723.001

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### Summary and research question
- Examines how dollar stablecoins affect parallel foreign-exchange markets in economies with fixed or heavily managed exchange rates.
- Focuses on environments where foreign currency is rationed and the true degree of exchange-rate misalignment is not directly observed.
- Contrasts traditional parallel markets—where information is dispersed across bilateral and often private trading opportunities—with stablecoin markets that create a visible, high-frequency price aggregating order flow in a common venue.

### Model and mechanism
- Builds a global-games model in which:
  - Households observe dispersed private signals about misalignment.
  - Stablecoin market depth determines the precision of a common public signal.
- Key mechanism: stablecoins both expand access to dollar-like claims and generate a public price that coordinates beliefs and actions.

### Main findings (state-dependent welfare effects)
- Stablecoins generate a state-dependent welfare effect.
- Access and allocation:
  - Stablecoins expand access to foreign-currency.
  - Stablecoins can improve allocation by making beliefs about misalignment more informative.
- Coordination externality and runs:
  - The public stablecoin price can coordinate runs by making beliefs and actions more synchronized.
  - When misalignment is low, access and allocation gains dominate, so stablecoins raise welfare.
  - When misalignment is high, the coordination externality can become more costly: a more precise public signal compresses belief dispersion, strengthens coordinated exit incentives, and can overturn the access benefit.

### Policy implications and recommended approach
- Points to a state-contingent approach:
  - Preserve low-cost access in normal states.
  - Use temporary, targeted measures to manage large or run-like flows when misalignment is high.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2026/07/10/stablecoins-and-fragility-in-fixed-exchange-rate-regimes-577641_