Stablecoin boom risks ‘cryptoization’ in emerging markets

Moody's Ratings cautions that the rapid adoption of stablecoins could threaten monetary policy and financial stability in emerging markets. The report highlights that the use of stablecoins—often pegged to fiat currencies like the US dollar—may diminish central banks' authority over interest rates and exchange rates, a phenomenon termed 'cryptoization.' Additionally, there is a risk of deposit erosion for banks as individuals might shift their savings into stablecoins or crypto wallets instead of maintaining them in domestic banks. The report notes that the global regulatory landscape for digital assets remains fragmented, with less than one-third of countries having established comprehensive regulations. This lack of uniformity can expose economies to increased volatility and systemic risks. While advanced economies are establishing clearer rules, the highest growth in stablecoin usage is occurring in emerging markets, particularly in Latin America, Southeast Asia, and Africa, driven by remittances, mobile payments, and inflation hedging.

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