International Monetary Fund warns: Widespread adoption of stablecoins may undermine central bank authority

[IMF Warns: Widespread Adoption of Stablecoins Could Weaken Central Bank Authority]

The International Monetary Fund (IMF) has stated that while stablecoins have the potential to expand individuals’ access to financial services, this could come at the expense of national central banks.

In a 56-page report released on Thursday, the organization pointed out that “currency substitution” is a potential risk posed by stablecoins, noting that this trend could gradually erode countries’ financial sovereignty.

Historically, if individuals wanted to hold U.S. dollars, they typically needed to possess physical cash or open certain types of bank accounts. However, the IMF emphasized that “stablecoins can rapidly penetrate a country’s economic system via the internet and smartphones.”

The organization added: “Especially in cross-border scenarios, using foreign-currency-denominated stablecoins could lead to currency substitution, potentially undermining monetary sovereignty, particularly in situations where non-custodial wallets are involved.”

The IMF stated that if a large volume of economic activity no longer relies on the local currency, central banks will find it difficult to effectively control domestic liquidity and interest rates.

The report noted that if foreign-currency-denominated stablecoins gain a foothold through payment services, local alternatives such as central bank digital currencies (CBDCs) could face competitive pressure. Unlike privately issued stablecoins, CBDCs are sovereign digital forms of currency issued, regulated, and managed by central banks.