IMF Warns Stablecoin Adoption Threatens Central Bank Monetary Sovereignty
The International Monetary Fund (IMF) published a 56-page report warning that the widespread adoption of stablecoins could erode monetary sovereignty through currency substitution. The report highlights that stablecoins can rapidly penetrate economies, particularly via the internet and smartphones, posing risks to central banks' control over domestic liquidity and interest rates if a significant share of economic activity moves away from the national currency. The proliferation of unhosted wallets further increases this risk.
According to the IMF, if foreign currency-denominated stablecoins become entrenched in payment systems, central bank digital currencies (CBDCs) may struggle to compete effectively. The report observes rising stablecoin holdings relative to foreign exchange deposits in regions such as Africa, the Middle East, Latin America, and the Caribbean, which could reduce the influence of monetary policy in these regions.
The stablecoin sector is predominantly USD-denominated, making up 97% of the $311 billion market, with euros accounting for approximately $675 million and yen for about $15 million. To protect monetary sovereignty, the IMF recommends establishing frameworks that prevent digital assets from being recognized as official currency or legal tender.
The European Central Bank (ECB) also expressed concerns that rapid growth in stablecoins could trigger retail deposit outflows and increase volatility in bank funding. The article further notes that recent U.S. stablecoin legislation and statements from U.S. Treasury Secretary Scott Bessent underline that higher demand for government debt could support stablecoins and onboard more users to the dollar-based digital asset economy.
