IMF Warns Dollar-Pegged Stablecoins Improve Foreign Currency Access but Amplify Risks of Currency Crises and Bank Runs

The IMF warns that dollar-pegged stablecoins may improve access to foreign currency but also amplify the risks of currency crises and bank runs.

In economic zones where governments artificially fix official rates and severely restrict foreign currency supply, residents are forced to rely on unofficial black markets to obtain dollars. Traditional street dealers and underground brokers operate in a geographically dispersed manner, with varying transaction prices, and there is no unified metric to gauge the true scarcity of dollars.

However, the rise of dollar-pegged stablecoins like Tether (USDT) has transformed this structure. The prices of stablecoins, which are constantly exchanged for local currencies on cryptocurrency exchanges, are publicly available and updated in real-time, beginning to function as a common benchmark for society as a whole.

Mechanism of Synchronization Panic Triggered by Visible Prices

According to a paper published by IMF researcher Brandon Joel Tan, the improved price discovery function of stablecoins enhances economic welfare during calm periods by providing households with asset hedging and reducing the cost of access to dollars.

However, once the divergence between the official rate and the actual rate exceeds a certain threshold, the nature of the risk reverses. When everyone sees the same public price indicator simultaneously, market crisis awareness and capital flight behavior synchronize instantly.

As a result, individual rational self-defense actions can escalate into large-scale capital outflows, triggering a sudden amplification of bank runs from local currencies.

Rapid Increase in Risks Shown by the Model

According to Tan's simulation analysis, the average probability of a crisis occurring in a cash-only economy is 3.9% when severe price imbalances arise, while in an economy where stablecoins are fully adopted, this probability jumps to 12.9%.

Furthermore, when the indicator of price imbalance exceeds a threshold of 0.59, the overall welfare effect on the economy can shift from positive to a maximum negative of -6.3%.

Accelerating Currency Substitution in South America

This phenomenon has already become a reality. In Bolivia, after the lifting of virtual asset regulations in 2024, the trading volume surged 12-fold in less than a year. Even retail stores at airports have begun to use USDT as a pricing standard.

In Argentina, under strict currency controls, residents are competing to move funds into dollar-pegged stablecoins through unofficial routes known as "crypto asset caves" to protect their assets from the depreciation of the official currency, the peso. These trends highlight macroeconomic risks such as the invalidation of monetary policy and evasion of capital controls, which are also a concern for the Financial Stability Board (FSB).

Need for Context-Dependent Approaches Rather Than Comprehensive Regulations

A blanket ban on stablecoins or overly broad regulations could have "regressive" adverse effects by depriving vulnerable households without bank accounts of low-cost dollar payment options.

Therefore, the paper recommends a flexible regulatory framework that adapts to circumstances rather than a one-size-fits-all exclusion. It suggests that while maintaining convenient access during calm periods, temporary and targeted trading restrictions should be applied only in situations where economic imbalances widen and crisis risks increase, particularly against large capital movements and abnormal panic trading.

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