Cryptoization of Emerging Markets Poses Risks to Financial Resilience: Moody's
Moody's latest report highlights the risks that cryptocurrency adoption poses to monetary sovereignty and financial resilience in emerging markets. It emphasizes that increased use of stablecoins, especially those pegged to the U.S. dollar, could weaken the monetary transmission framework, as pricing shifts away from domestic currencies. By 2024, the number of cryptocurrency owners is estimated to rise to 562 million, reflecting a 33% increase from 2023, with significant growth observed in regions like Southeast Asia, Africa, and Latin America. These areas often adopt crypto due to inflation, currency pressures, and limited banking access, contrasting with advanced economies where adoption is primarily influenced by institutional integration and regulatory clarity. The report also warns that cryptocurrency can enable discreet capital flight through pseudonymous wallets, undermining exchange rate stability. Overall, the implications of this 'cryptoization' could resemble unofficial dollarization, presenting challenges for regulatory visibility and financial governance.
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