IMF paper links dollar stablecoins to amplified currency runs in emerging markets
A new International Monetary Fund working paper warns that while US dollar-pegged digital tokens provide crucial foreign exchange access in emerging markets, their transparent pricing mechanisms could accelerate devastating capital flight during currency crises.
The International Monetary Fund released a working paper analyzing how US dollar stablecoins impact nations operating under fixed or heavily managed exchange rate regimes. Authored by economist Brandon Joel Tan, the research concludes that while these digital assets alleviate foreign currency shortages, they simultaneously introduce new systemic fragilities.
Tan’s paper, titled “Stablecoins and Fragility in Fixed Exchange Rate Regimes,” models the behavior of parallel foreign-exchange markets when official dollar access is restricted. The study finds that stablecoins make “dollar-like claims easier to access” when traditional banks cannot meet public demand.
However, this accessibility creates a highly visible, high-frequency benchmark for dollar demand. When a nation's official exchange rate diverges significantly from the market reality, the stablecoin price acts as a stark signal of growing dollar scarcity.
This transparent pricing can inadvertently coordinate mass exits from the domestic currency during periods of severe stress. Tan argues that the visible market rate can prompt widespread abandonment of the local currency, effectively amplifying traditional currency runs.
To mitigate these risks, the economist suggests that regulators might need to impose temporary limits on unusually large or panic-driven stablecoin transactions. Such interventions could theoretically slow down the feedback loop that turns isolated capital flight into a systemic crisis.
The theoretical risks are already manifesting in emerging economies where official dollar access is constrained. On June 9, 2025, airport retailers in Bolivia began pricing goods using the USDT stablecoin as a reference point, even while continuing to accept physical dollars and local bolivianos.
Similarly, residents in Argentina have increasingly turned to underground crypto caves to swap depreciating pesos for dollar-pegged tokens. These informal channels allowed citizens in 2024 to preserve their purchasing power at unofficial market rates when strict capital controls blocked traditional access to physical dollars.
Global regulatory bodies are already sounding the alarm on these broader macroeconomic threats. On March 24, the Financial Stability Board warned that the proliferation of dollar stablecoins could expose emerging markets to rapid currency substitution and weakened domestic monetary policy.
The board also highlighted the risk that these digital assets facilitate the circumvention of established capital-flow measures. Consequently, the Financial Stability Board urged lawmakers to closely monitor the sector's expansion to better understand and manage the resulting liquidity and operational risks.
