IMF Report Raises Concerns About Dollar-Dominated Stablecoin Impact on Emerging Markets

A new IMF report sheds light on the increasing adoption of dollar-pegged stablecoins in emerging markets and developing economies, sparking concerns about their potential impact on financial stability. According to the ‘Understanding Stablecoins’ report, these digital assets are rapidly penetrating regions like Africa, the Middle East, and Latin America via mobile wallets and online platforms, even those involving unhosted wallets. This trend could lead to ‘currency substitution,’ potentially weakening local currency usage and hindering monetary policy transmission as well as seigniorage revenue collection.