Global stablecoins (GSCs), which are stablecoins that could be widely used as a means of payment and/or store of value across multiple jurisdictions, could pose significant risks to financial stability. The collapse and de-peg of certain stablecoins since the outbreak of the crypto-asset market turmoil in 2022 highlights the potential fragility of stablecoins that are not adequately designed and regulated. ⚠️ Stablecoins also present concerns related to financial integrity, illicit finance, data privacy, cyber-security, consumer and investor protections, market integrity, fiscal stability, and macroeconomic stability. 🛡️
Emerging markets and developing economies (EMDEs) may be exposed to macro-financial risks arising from the use of foreign currency-pegged GSCs, which can increase financial stability risks by destabilizing financial flows and straining fiscal resources. 🌐 Emerging markets and developing economies (EMDEs) may face additional implementation challenges due to several factors. These factors include heightened risks associated with the prevalence of foreign-currency-pegged GSCs and a relatively higher level of activity related to stablecoins prior to the establishment of a comprehensive regulatory framework, as well as the extensive cross-border operations of foreign-currency pegged stablecoins. 💰
Two case studies based on public blockchain data and preliminary analysis by some emerging markets and developing economies (EMDEs) authorities suggest a relatively higher level of interest in and level of activity related to stablecoins in emerging markets and developing economies (EMDEs) compared to advanced economies (AEs). 📈There are many reasons for this, including:
1. Qualcomm. In countries with high inflation, currency devaluations or capital flow management measures (CFMs), stable currencies linked to the US dollar are preferred as stores of value; 💵
2. Speculative trading in various crypto assets with stablecoins pegged to the US dollar has a liquidity advantage compared to other trading pairs. 📊
3. In some cases, stablecoins facilitate cross-border payments and remittances. 💸
