Dollar stablecoins could improve FX access but amplify currency runs: IMF paper
An IMF working paper finds that dollar stablecoins can improve access to foreign currency in economies with fixed or heavily managed exchange rates, especially when official dollar supply is rationed. They can act as a parallel FX market and price benchmark, helping households and businesses obtain dollar-like claims when banks or official channels fall short. But the same visibility can worsen fragility in a crisis: when the stablecoin price signals rising dollar scarcity, people may rush out of the local currency at once, amplifying a run. The paper suggests regulators may need temporary limits on unusually large or panic-driven transactions during severe stress. Recent cases in countries such as Bolivia and Argentina show stablecoins already functioning as informal dollar references. The FSB has also warned they can increase currency substitution, weaken monetary policy, and undermine capital controls.
