IMF Flags Stablecoins as Source of Risk to Emerging Markets, Experts Say We Aren't There Yet

What to know:

• The IMF warns that USD-pegged stablecoins could undermine local currencies in emerging markets by facilitating currency substitution and capital outflows.
• Despite concerns, experts argue that the stablecoin market is still too small to have a significant macroeconomic impact.
• Stablecoins are primarily used for crypto trading, and their market size remains small compared to global currency flows.

The International Monetary Fund's (IMF) December 2025 report warns that USD-pegged stablecoins could spark currency substitution and capital outflows in vulnerable emerging markets (EMS), undermining local currencies.

The December report titled "Understanding Stablecoins" delves into stablecoin use cases, demand drivers, global regulations, and macro financial risks, particularly for emerging markets.

"Stablecoins could be used to circumvent capital flow management measures (CFMs). The implementation of CFMs relies on established financial intermediaries. By providing an avenue for capital flows outside of the common rails, stablecoins could be used to effectively undermine the implementation of CFMs (Cardozo and others 2024; He and others 2022; IMF 2023)," the report said.

"Indeed, some evidence points to crypto, including stablecoins, being used as a marketplace for capital flight," the report added.

The global monetary authority argued that the penetration of stablecoins in emerging markets with high inflation and volatile fiat currencies could trigger "currency substitution," in which locals ditch volatile fiat for USD-pegged tokens, eroding central bank control.

Dollar equivalents

These concerns are not unfounded, as stablecoins, whose values are pegged to external references such as fiat currencies, facilitate transactions outside traditional banking channels.

The most popular stablecoins, USDT and USD Coin (USDC), are pegged to the U.S. dollar and boast a combined market cap of $264 billion, according to CoinDesk data. That amount is almost equal to France's FX reserves and larger than those of the UAE, the United Kingdom, Israel, Thailand, and many other nations.

These dollar equivalents, some of which have been accepted as permitted payment stablecoins under the GENIUS Act in the U.S., can be freely traded on public blockchains, meaning anyone, anywhere in the world, can access dollars without having to open a bank account or follow the often-tenacious guidelines for engaging in forex transactions.

The result: If panic grips EMs, locals can now move capital across borders seamlessly and swiftly via stablecoins, weakening capital flow management measures.

Imagine stablecoins existing during the 2013 taper tantrum, when Fed signals triggered sharp EM depreciations and massive outflows – their seamless peer-to-peer transfers could have easily worsened the crisis by accelerating outflows and currency declines.

What if EMs run into a similar macro panic now?