A new working paper from the International Monetary Fund (IMF) has revealed that U.S. dollar stablecoins can alleviate the scarcity of foreign exchange in emerging markets with restricted convertibility. However, the IMF warns that in times of financial instability, they can exacerbate the flight of capital out of the country, depleting the local currency.
The report shows that stablecoins can provide individuals and businesses with access to hard assets such as the U.S. dollar in places where banks cannot supply them with the needed liquidity. IMF Warns Dollar Stablecoins Could Increase Currency Crisis Risks
According to the paper, during a currency crisis, the rush into dollar stablecoins is likely to intensify the outflow of funds and put additional pressure on the local currency. The authors stress that policymakers need to cushion the potential disruptive impact on financial systems by implementing regulatory sandboxes during times of crisis.
The IMF states that stablecoins could facilitate international transactions and promote financial inclusion if well-regulated frameworks are designed to support their growth.
Source: imf.org
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