BASEL, Switzerland—The Financial Stability Board has published a report highlighting the risks affecting emerging economies from foreign currency stablecoins.
“In countries with unstable currencies and high inflation, stablecoins provide an option to park funds elsewhere,” Ledger Insights stated. “Some data may illustrate that emerging market crypto users, such as Argentinians, live day to day using their dollar stablecoins. However, the FSB’s view is at a bigger picture level. In countries that impose capital controls, stablecoins and crypto provide a way to circumvent these.”
Stablecoins are predominantly (99.6%) in U.S. dollars, Ledger Insights said.
Potential Threat
“If a sufficient proportion of the population uses stablecoins, this could threaten the country’s monetary sovereignty, although the FSB doesn’t see that happening yet,” Ledger Insights said.
According to the report, a key takeaway is that a stablecoin could become systemically important in an emerging market before the stablecoin is considered a global stablecoin in its home issuance market.
“That presents a challenge for the emerging market economy,” Ledger Insights added.