Stablecoins could erode central bank control, says IMF

The rise of stablecoins could reduce the control of national monetary authorities, according to the International Monetary Fund.

As noted by the International Monetary Fund in a recent report, stablecoins offer an opportunity to expand access to financial services for millions of people, but they could also undermine the authority of central banks.

The 56-page document published on December 4 by the international organization highlights “currency substitution” as one of the main risks associated with the spread of stablecoins. This phenomenon could gradually compromise the financial independence of many states, the IMF stated.

The institution emphasized that the use of stablecoins denominated in foreign currencies, especially in cross-border transactions, could trigger currency substitution dynamics and potentially undermine the sovereignty of national authorities, particularly when non-custodial wallets are used.

When a significant portion of economic activity shifts from the national currency to digital alternatives, central banks lose effectiveness in managing domestic liquidity and setting interest rates, the global financial institution argued. The report also notes that if foreign currency stablecoins gain traction through payment services, local solutions such as central bank digital currencies (CBDCs) could struggle to compete.

The organization found that regions such as Africa, the Middle East, Latin America, and the Caribbean are seeing significant growth in stablecoin adoption compared to traditional foreign currency deposits, instruments that central banks use to influence monetary policy.

However, the IMF acknowledged that currency substitution is often driven by real needs: citizens in countries with high inflation seek financial stability through these digital tools.

To safeguard national monetary independence, the International Monetary Fund recommends that governments implement regulations preventing digital assets from being recognized as official currency or legal tender. Such recognition would compel people to accept digital assets as a form of payment, the institution stated.

In November, the European Central Bank published an article highlighting the risks associated with dollar-denominated stablecoins, emphasizing how they could absorb resources from the traditional financial system. “Significant growth in stablecoins could cause retail deposit outflows, diminishing an important source of funding for banks and leaving them with more volatile funding overall,” the ECB stated.

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