How Will the International Financial Institutions Manage the Stablecoin Stampede?

One of the events we will be watching at the World Bank/IMF Annual Meetings is on the risks and opportunities of stablecoins in emerging economies. The session is timely: stablecoin transactions have soared since the Spring Meetings, with more and more entrants crowding the market following passage of the US GENIUS Act, which created a regulatory framework and required that stablecoins be backed 1:1 by low-risk assets. Net stablecoin creation (i.e., new tokens minus redemptions) jumped from $10.8 billion in Q2 2025 to $45.6 billion in Q3, an increase of 324 percent, putting current total market capitalization at about $300 billion. While these amounts are small relative to total global payments, this could change quickly. In our view, a major disruption of the international payments systems is just a matter of time, with profound ramifications for the global economy.

As champions of global financial stability and economic development respectively, the International Monetary Fund (IMF) and World Bank should be at the forefront of efforts to help member countries realize the benefits of stablecoins while mitigating the risks. The IMF has been very active on cryptocurrency, advising countries on an ad hoc basis, recommending policy responses and proposing regulatory requirements. But there are gaps, especially for stablecoins. Meanwhile, the multilateral development banks (MDBs), including the World Bank, are largely missing in action. We detail all of this in our forthcoming paper; this blog is intended to introduce the topic and highlight key points.

What are stablecoins?

First launched in 2014, stablecoins are a form of digital currency pegged to another asset (e.g., currency or gold) to maintain a stable price. Unlike fiat currency, they can be issued by private companies, enabling a much more decentralized financial system than we have become accustomed to over the last century. The recently passed GENIUS Act mandates that stablecoins issued in the US be fully backed by low-risk assets (e.g., cash deposits or Treasury bills) and regularly audited. This significantly reduces the risk to holders, making them an increasingly appealing asset. But, unlike bank deposits, stablecoins are not federally insured nor do issuers of stablecoins have a lender of last resort in the form of the central bank.

Currently, stablecoin prognostications run the gamut: some praise them as an exciting innovation that is providing much-needed competition with traditional payment offerings, reducing costs and improving services, while others see a looming threat with the potential to inject chaos into the global financial ecosystem. Like any major innovation, there will be winners and losers.

Why are stablecoins becoming so popular?

The fundamental appeal of stablecoins lies in their ability to simplify and accelerate cross-border transactions while retaining a reliable store of value. Stablecoin-based cross-border transactions are immediate and offer much lower costs than standard transmission mechanisms (like Western Union or the banking protocol SWIFT), making them good options for remittance transfers and cross-border settlement. Stablecoins can also mitigate local currency and inflationary risks, major advantages in volatile markets. This feature has led to rapid stablecoin adoption in countries like Argentina, Nigeria, and Venezuela.

Stablecoins are also a good option for the unbanked—there are no minimum fees, identification requirements are less onerous, and transactions can be made with a phone. Several of the world’s leading humanitarian organizations like the World Food Programme and the United Nations High Commissioner for Refugees (UNHCR) have turned to dollar-denominated stablecoins to disburse aid to vulnerable populations. In Afghanistan, where 85–90 percent of the population is unbanked, the payments platform HesabPay has introduced a local currency based stablecoin to help vulnerable citizens meet basic human needs.

How fast are stablecoins growing?

Stablecoins still represent less than one percent of daily money transfers. In addition, nearly 90 percent of stablecoin transactions are for cryptocurrency trading, and do not reflect real economic activity. Growth projections for the supply of stablecoins vary greatly. Analysts at Keyrock, a crypto investment company, and Bitso, a South American cryptocurrency exchange, are betting that stablecoins will account for 12 percent of money transfers by 2030. Citgroup just raised its 2030 base case forecast for the stablecoin market from its April estimate of $1.6 trillion to $1.9 trillion, and its bull case scenario from $3.7 trillion to 4 trillion, compared to just over $300 billion today.

Which scenario prevails will depend on the regulatory frameworks of major economies and how seamlessly stablecoins are integrated into current payments systems.

There are ample signs that stablecoins will become a standard option for users sooner rather than later. Last month, Moneygram, one of the biggest money service transfer providers in the world, launched a stablecoin service in Colombia, a key remittance hub. This is a lucrative market: MoneyGram currently serves more than 50 million people across 200 countries and territories, moving over $42 billion annually.

In late September, Visa launched a pilot to test stablecoins for cross-border payments and SWIFT announced plans to create its own blockchain to better compete with the stablecoin industry, working with commercial banks to create its own “shared digital ledger.” Visa has also partnered with Yellow Card Financial, an African stablecoin payments provider, to launch stablecoin transactions in at least one African country this year, with additional rollouts expected in 2026. But in perhaps the most consequential announcement, the payments platform Stripe has launched a new offering, Open Issuance, that enables businesses to issue their own stablecoins. Table 1 gives a sense of the dynamism within the stablecoin industry. In fact, we predict it will be out of date within days of this publication going to press.

Are stablecoins risky?

There are myriad downside risks to a major increase in stablecoin use. These include:

• Significant differences in the risk profile of stablecoins. The vast majority of stablecoins are linked to the US dollar, but assets backing the stablecoins vary, depending on the jurisdiction of the issuer. Two stablecoins heavily dominate the market: El Salvador-based Tether (USDT) and US-based Circle (USDC). As a US-based company, Circle is subject to monthly disclosures and third-party audits as required by the GENIUS Act, but Tether is not. (Tether has said it plans to issue a US-based version of its currency.)
• The need for a trusted centralized entity to hold and manage reserves. If reserves are not fully liquid or are managed poorly, confidence can falter, and the peg can break. This is not just theoretical: in 2023, Circle’s USDC broke its peg when investors rapidly redeemed stablecoins due to concerns that Circle would be unable to access the $3.3 billion in reserves it held at the now-defunct Silicon Valley Bank. The IMF and others have stressed that rapid stablecoin redemptions could also exacerbate local currency and financial market volatility and exert pressure on macroeconomic growth.
• Increased competition for deposits, leading to increased dollarization and undermining monetary sovereignty. The risk is greater for already volatile markets facing high inflation and sharp currency swings. They also exacerbate capital flight risks because users can hold dollar proxies at home that can be instantly exchanged for real dollars offshore. Analysts at Standard Chartered predict stablecoins could draw $1 trillion in deposits from banks in emerging markets over the next three years from vulnerable markets like Pakistan and Egypt.
• The potential loss of seigniorage (i.e., the profit from issuing currency represented by the difference between the cost of producing the currency and its face value). As our CGD colleague Sanjeev Gupta discusses here, for countries struggling with low tax-to-GDP revenue, this could represent a significant loss.
• Significant integrity risks. Stablecoins circulate freely across borders onto different exchanges, making them prone to illicit use. Most users access stablecoins via “hosted” wallets provided by crypto exchanges that have onboarding processes, which in principle are similar to banks, but stablecoins can also be accessed via un-hosted wallets, which do not.
• Risks of cyberattacks. Stablecoins could fall victim to a cyberattack, with hackers draining funds or manipulating token issuances.

Some of these risks can be mitigated by effective regulatory frameworks. The problem is that the pace of stablecoin adoption is moving much faster than regulatory action and treatment is far from uniform. Many major markets have adopted stablecoin regulations, including the EU, US, Hong Kong, and UAE, but the UK and Canada are still dithering. Unfortunately, inconsistent treatment of stablecoins presents yet another risk: regulatory arbitrage.

What Should the IFIs be Doing?

Despite these myriad risks, the benefits that stablecoins offer are driving strong and growing demand, and the stablecoin universe is expanding rapidly. There is a major role for the international financial institutions (IFIs) in helping to smooth the way for the adoption of stablecoins, especially the International Monetary Fund (IMF), which is charged with promoting global financial stability. The MDBs have an important role too, supporting financial sector stability and helping to ensure that the benefits of stablecoins are widely shared. World Bank President Ajay Banga should lead the way by integrating stablecoins into his vision for digital transformation, which he sees as key to driving financial inclusion and economic opportunity.

The IMF

The IFIs have multiple channels for exercising leadership on this issue, including through country-level engagement, convenings, guidance notes, monitoring tools, and flagship publications. For crypto assets broadly, the IMF has been active on all these fronts, issuing a policy paper in 2023 to provide guidance on an appropriate policy response to crypto assets and a synthesis paper with the Financial Stability Board (FSB) on policies for crypto-assets laying out the roles and responsibilities of key actors (e.g., the IMF, FSB, Financial Action Task Force, and major standard setting bodies). The October 2024 status report on implementation of the roadmap is the first IMF publication with a substantive discussion on stablecoins; it recommends that they “be subject to specific regulatory requirements due to their vulnerability to a sudden loss in confidence and to potential runs on the issuer or underlying reserve assets.”

As part of the roadmap, the IMF agreed to integrate crypto-asset policies into Article IV assessments (i.e., annual and bi-annual economic country reports) and Financial Sector Assessment Programs (FSAPs), “where suitable.” That phrasing, “where suitable,” leaves a lot of room for judgment, and we were surprised to find that the latest FSAP for India, issued in February 2025, did not once reference cryptocurrency or stablecoins. This is a notable oversight considering that India is among the fastest cryptocurrency adopters in the world and has yet to adopt an enabling regulatory framework. Also surprising was the absence of any discussion of South Africa’s cryptocurrency regime in its January 2024 Article IV review, although the government is positioning the country to be a leader in crypto.

In the context of this uneven coverage, the IMF should work with its board to develop a set of criteria that provides more explicit guidance on when and how to engage with member countries on stablecoins (i.e., beyond “when suitable”), including in country programs.

In addition, the IMF should:

• Provide assessments of regulatory frameworks governing stablecoins in major economies, including what risks they do and do not mitigate, starting with the US GENIUS Act.
• Report on stablecoin growth by issuance, including market shares and the quality of regulatory frameworks they operate under, and highlight the potential for regulatory arbitrage. It should consider as well whether to encourage uniformity of treatment to reduce arbitrage risks.
• Assess how stablecoins are affecting the use of major currencies as well as global demand for the underlying assets.
• Report on countries with the highest stablecoin usage, their purposes, and potential risks, especially to domestic banking systems.

The World Bank

The World Bank also needs to step up its game. In a September report 2023 laying out the roles of key international organizations on implementation of crypto-asset policy frameworks, the World Bank is listed along with IMF as responsible for integrating recommendations for such frameworks through technical assistance and capacity building. It is also expected to work jointly with the IMF on preparation of FSAPs in emerging markets and developing economies. But the roadmap update a year later (October 2024) makes no mention of the World Bank.

The most significant treatment of stablecoins by the Bank is in a 2022 flagship technical note, “What Does Digital Money Mean for Emerging Market and Developing Economies,” which takes a cautious approach. Noting the risks and challenges of stablecoin adoption, the authors suggest that “authorities may consider limiting or even prohibiting the use of stablecoins as a means of payment, and bar regulated entities such as banks and agent networks from holding stablecoins or offering stablecoin services.” With few exceptions (e.g., China), this is plainly not the direction of travel.

In the last two years, the Bank has been relatively quiet on stablecoins and cryptocurrency broadly. This should change. A good start would be to develop a strategy around stablecoins articulating their relevance to the Bank’s mandate and providing terms of engagement with client countries, both in terms of risk management and advancing development goals. In addition, it should:

• Incorporate stablecoins into financial inclusion and digital transformation strategies and relevant public messaging.
• Explore and advise on the potential for stablecoin adoption in high remittance countries (e.g., see this case for Tanzania).
• Assess the potential value of stablecoins in unstable economies, including fragile and conflict-affected states (FCS), especially at scale.

Conclusion

Because stablecoins offer faster, cheaper, and more efficient service than conventional payments platforms, as well as a reliable store of value, their growth is poised to be explosive. Right now, a plausible trajectory is the rapid acceleration of stablecoin use in the absence of effective regulations, potentially destabilizing markets and exacerbating global inequality. The IFIs need to be more proactive in managing the stablecoin stampede. This is not an agenda that can wait.