Fragmented rules leave emerging economies vulnerable as adoption surges globally
A new Moody’s Ratings report has cautioned that the rapid rise of stablecoins could weaken central banks’ control over monetary policy and erode trust in traditional banking systems. The warning highlights the growing risk of “cryptoization” in emerging markets where stablecoins are increasingly being used for payments, remittances, and as a hedge against inflation.
Risks to banks and monetary policy
Moody’s explained that stablecoins — digital tokens pegged to fiat currencies such as the US dollar — may “undermine exchange rate stability and interest rate control” in economies with weak financial systems.\
The report added that banks could face deposit losses as households and businesses shift savings into crypto wallets, creating liquidity pressures. “The rapid growth of stablecoins, despite their perceived safety, introduces systemic vulnerabilities: insufficient oversight could trigger runs on reserves and force costly government bailouts if pegs collapse,” the agency wrote.
Emerging markets most exposed
While advanced economies often adopt stablecoins under clearer regulatory regimes, Moody’s found the fastest growth in Latin America, Southeast Asia, and Africa. In these regions, digital assets are commonly used for remittances, mobile payments, and protection against local currency volatility.
In 2024, global digital asset ownership climbed to an estimated 562 million people, a 33% increase from the prior year. Moody’s noted that such expansion underscores both the potential for financial inclusion and the risk of instability if regulations fail to keep pace.
Progress in major economies
Some jurisdictions are moving toward clearer frameworks. The EU’s Markets in Crypto-Assets (MiCA) regime, fully implemented in late 2024, now requires strict licensing and disclosure for stablecoin issuers. In the United States, the GENIUS Act, signed into law in July, set standards for issuance and backing.
China, after banning crypto trading in 2021, has shifted focus to the digital yuan while exploring tightly controlled yuan-backed stablecoins. The People’s Bank of China recently opened a new Shanghai hub to expand blockchain-based cross-border payments.
Moody’s concluded that without stronger global coordination, stablecoin growth could expose vulnerable economies to shocks while reshaping international finance.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.