IMF Stablecoin Warning Highlights Threat to Central Banks

The International Monetary Fund (IMF) has warned that the fast rise of stablecoins may weaken the control that central banks have over their own money. Stablecoins are digital tokens that try to keep a steady value, usually by linking their price to the US dollar. Today, about 97% of all stablecoins are dollar-based, and this strong link to the dollar is creating concerns for many countries.

Why the IMF Is Worried

The IMF stablecoin warning says that stablecoins can lead to something called “currency substitution.” This happens when people stop using their local money and start using something else. In this case, they may shift to dollar-backed stablecoins. As a result, the local central bank would lose some power.

Because of this shift, it becomes harder for central banks to set interest rates or control the amount of money moving through the economy. This could make it more difficult for a country to respond to financial problems.

The IMF also explains that stablecoins spread very fast. They work on the internet, they are easy to use, and they allow cheap and quick money transfers. For people in countries with weak currencies or high inflation, stablecoins may feel safer than local money. However, this creates long-term risks.

Why Stablecoins Are Becoming Popular

Many people use stablecoins because they want simple and low-cost transfers. Some also want a safer place to keep their money when their local currency loses value.

But as more people use stablecoins, banks may lose deposits. When banks have fewer deposits, they may struggle to give loans. This can slow down economic growth. Moreover, stablecoins can move across borders very easily. This makes it harder for governments to control illegal activity or sudden money flows.

The U.S. Sees a Different Side

Even though the IMF stablecoin warning is about these risks, the U.S. Treasury sees a possible benefit. U.S. Treasury Secretary Scott Bessent says stablecoins could increase global demand for U.S. government debt, such as Treasury bills. Since most stablecoins are tied to the dollar, their growth may increase the world’s need for U.S. assets.

Because of this, the U.S. expects the stablecoin market to grow even more in the coming years.

Finding the Right Balance

The IMF is not asking countries to ban stablecoins. Instead, it wants stronger rules to protect local money systems. Clear laws, safe reserves and proper oversight can help reduce risks.

Stablecoins still offer useful tools, especially for fast and cheap payments. But countries now face a major task of supporting innovation while still protecting their financial stability.