The International Monetary Fund (IMF) released a report in December warning that stablecoins could pose a significant risk to emerging markets and developing economies (EMDEs), potentially undermining local currencies. The report claimed that stablecoins could facilitate capital outflow and currency substitutions across EMDEs. However, experts argue that the current market size of stablecoins is too small to have a meaningful macroeconomic impact.
The IMF emphasizes that these fiat-pegged tokens could be used to circumvent capital flow management measures (CFMs), whose implementation relies on recognized financial mediators. Stablecoins could potentially undermine the implementation of CFMs by providing an avenue for capital flows outside of standard financial rails. Additionally, the IMF report claimed there is evidence indicating that stablecoins are being used as a means of capital flight in EMDEs. These concerns may be valid, as fiat-pegged stablecoins facilitate transactions outside common banking channels.
For perspective, the U.S. dollar-pegged USDT and USDC collectively boast a market capitalization of nearly $264 billion, according to CoinMarketCap’s on-chain data. This amount is comparable with France’s foreign exchange reserves and is larger than that of many other countries, including Thailand, the UK, Israel, and the UAE. This suggests that individuals in EMDEs experiencing economic instability can move capital across borders using stablecoins, potentially weakening the monitoring of capital flows.
Stablecoins: Too Small for Macroeconomic Impact, Say Experts
Noelle Acheson, author of the Crypto is Macro Now newsletter, stated that while the IMF's concerns may seem plausible, the stablecoin market is still too small to significantly impact the macroeconomics of emerging markets, despite its rapid growth. She added that the total market size of stablecoins is tiny compared to foreign exchange flows.
Acheson also noted that stablecoins being legalized by the GENIUS Act will not be relevant until sometime in January 2027, even though the law has already been passed. She pointed out that stablecoins may never gain significant relevance in EMDEs where traders are required to adhere to local legislation, and authorities in some of these economies may be entirely against the use of stablecoins.
David Duong, Coinbase's head of institutional research, shared a similar sentiment, stating that stablecoins are limited in scale and that policies prevent systemic frictions. He noted that while stablecoins can accelerate a flight to USD in nations where they are already popular, their overall scale is small compared to cross-border portfolio flows. Duong believes that non-deliverable forwards (NDF) channels, mutual fund outflows, and bond/equity redemption mechanisms would still dominate macroeconomic impacts.
Stablecoin Cross-Border Flows Outpace Unbacked Crypto Assets
The IMF report revealed that stablecoin cross-border flows already eclipse those of unbacked crypto assets, such as Bitcoin, with this gap widening. The report also noted that the Asia-Pacific region leads in absolute stablecoin volumes, followed by North America. However, economies in Africa, the Middle East, the Caribbean, and Latin America (EMDEs) stand out when these volumes are scaled to their Gross Domestic Product (GDP).
Meanwhile, Acheson observed that the U.S. dollar remains deeply entrenched in the global economy, despite the rapid growth of fiat-backed stablecoins, which have increased from $5 billion in 2020 to roughly $300 billion currently. She further noted that although the dollar does not have a market capitalization like crypto or stocks, its global physical cash and reserves exceed $2.5 trillion. Broader measures, such as M2 and international liabilities, also dwarf stablecoins, standing at $20 trillion and $100 trillion, respectively.
Furthermore, Acheson indicated that approximately 80% of stablecoins in EMDEs are used for crypto trading rather than for managing treasuries. The IMF report also acknowledged that EMDEs dominate these corridors, with 2024 flows reaching approximately $1.5 trillion. However, this figure represents only a fraction of the quadrillion-dollar global payments market, which is predominantly managed by the USD.