The IMF has issued a new report that evaluates the rapid growth of the global stable-coin market and the state of regulations worldwide – calling attention to structural vulnerabilities and the need for strong, coordinated oversight.
In its “Understanding Stablecoins” 2025 report, the IMF analysed regulatory frameworks from various jurisdictions, including the US, UK, Japan and the EU. The organisation noted that while emerging regulation can help mitigate some macro-financial risks tied to stablecoins, the overall global landscape remains highly fragmented. This fragmentation – in policy design, issuance frameworks and regulatory treatment – could undermine efforts to contain risks.
The IMF warned that the proliferation of stablecoins issued across various blockchains and exchanges raises serious interoperability concerns. These disparities could translate into cross-border inefficiencies and regulatory arbitrage, especially as different countries adopt different rules for stable-coin issuance and use.
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What Stablecoins are Backed By – and Where the Risk Lies
According to the report, the two largest stablecoins by market cap – Tether (USDT) and USD Coin (USDC) – are “backed mostly” by liquid assets such as:
Short-term U.S Treasuries
Reverse-repo collateralised with U.S. Treasuries, and
Bank deposits.
In particular, roughly 40% of USDC’s reserves and about 75% of USDT’s reserves are held in short-term U.S. Treasuries.
The report also notes that USDT holds a portion of reserves in cryptocurrencies (including a small share in Bitcoin).
Yet, despite these reserve-backing mechanisms, the IMF cautions the market remains vulnerable: if confidence erodes and a rush to redeem stablecoins occurs, the scale of the reserves may pose systemic risks – especially if multiple redemptions happen simultaneously.
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Macro-Financial and Monetary Sovereignty Risks
The IMF elaborates a number of long-term macro-economic risks if stablecoins – particularly those pegged to major currencies – become deeply integrated into global payments and storage of value.
Key concerns include:
Currency substitution / dollarization: Widespread adoption of dollar-pegged stable-coins could weaken local currencies – especially in economies with fragile macroeconomic fundamentals. This might undermine the ability of central banks to conduct effective monetary policy.
Disintermediation of banking and credit disruption: As people shift savings and payments towards stable-coins, traditional bank deposit bases may shrink, reducing the banks’ capacity to lend – potentially stalling credit growth.
Risks to fiscal revenues and seigniorage: If stable-coin use supplants sovereign currencies, governments could lose out on seigniorage revenues (the profit made by issuing currency). This could have ripple effects on public finances.
Moreover, the IMF argues that tokenization – where assets, money, and payments can all be handled on a programmable ledger – could radically reshape global finance. While this promises efficiency and broader access, it also heightens the risks of financial fragility, capital flow volatility, exchange-rate instability, and a concentration of financial power in the hands of a few large private issuers.
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Regional Patterns in Stablecoin Usage
The IMF paper highlights the considerable variation in stablecoin usage regionally.
In absolute terms, the Asia and Pacific region leads with the highest volume of stablecoin activity, followed by North America. However, when measured relative to GDP, Africa and the Middle East, as well as Latin America and the Caribbean, stand out. In terms of net flows, stablecoins flow overwhelmingly from North America to other regions, where they could be satisfying local demand for stablecoins as a store of value, in addition to being used for cross-border payments.
There is also substantial heterogeneity across payment corridors, with EMDEs featuring more prominently in stablecoin cross-border flows than traditional flows. Stablecoin cross-border payment flows (about $1.5 trillion) represent only a small fraction of the global cross-border traditional and crypto payment market, which approached a value of about one quadrillion dollars in 2024.
Stablecoin flows between emerging market and developing economies account for the largest share by value. Flows from emerging market and developing economies to advanced economies, and vice versa, also represent a significant portion of total stablecoin cross-border activity.
This pattern contrasts with traditional cross-border payments routed through systems such as SWIFT, where within-advanced economy cross-border flows play a clear dominant role.
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Why Regulation Alone Isn’t Enough — Need for Strong Institutions and Coordination
The IMF emphasizes that stabilizing stablecoins requires more than just regulatory patches. According to the report, robust macro-economic policies, credible institutions, and a strong regulatory framework must work together as the first line of defense. Only then can stablecoins’ risks – from asset backing, reserve liquidity, cross-border flows, and monetary substitution – be effectively managed.
The IMF therefore calls for comprehensive, globally-coordinated regulation:
Consistent legal treatment of crypto activities
Prudential and conduct rules
Anti-money-laundering and combating-financing-of-terrorism (AML/CFT) compliance
for all entities issuing, trading, custodying or transferring crypto assets.
For “systemic stable-coin arrangements,” additional oversight – similar to the regulation of financial market infrastructures – is needed.
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What This Means for Emerging Markets (and African Economies)
Several factors could affect the future demand for stablecoins. These include the attractiveness of the underlying currency vis-à-vis the local currency, new use cases, enabling legal and regulatory frameworks, and ease of access. The demand for stablecoins is closely linked to the demand for their currency of denomination. As the vast majority of stablecoins are currently denominated in US dollars, their growth will likely hinge on the continued dominance of the dollar in trade, foreign exchange reserves, international loans, international debt, foreign exchange turnover, and global payments.
New use cases can also support higher demand for stablecoins. Currently, stablecoins are used as on- and offramps from unbacked crypto assets and to some degree for cross-border payments. Going forward, these use cases could grow. Moreover, new use cases could emerge.
First, stablecoins could be used to pay for tokenized financial assets. Their wider adoption in this case depends on the growth of the tokenized sector.
Second, they could expand into domestic retail payments for goods and services.
The latter would likely require deeper integration with existing payment rails and broader merchant acceptance, which may find greater traction in countries with underdeveloped payment systems, where they could offer a lower-cost and more convenient alternative payment method.
To the extent that stablecoins provide easier access to foreign currency for firms and individuals in emerging markets with weak currencies and high inflation, the demand for these instruments could increase further.
For countries with weak financial systems, volatile currencies or unstable monetary policy – conditions common across many African economies – the growing footprint of stablecoins could pose a dual-edged sword. On one hand, stablecoins offer cheaper cross-border payments, faster remittances and potential financial inclusion. On the other hand, if unmanaged, stablecoin adoption could destabilise local currencies, undermine sovereign monetary control, erode bank deposit bases, and ultimately weaken financial stability.
This makes the IMF’s call for strong domestic institutions, transparent regulation and international coordination especially urgent.
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