IMF Study Warns Stablecoins Can Boost Welfare but Increase Crisis Risks

Stablecoins can improve access to U.S. dollars during normal economic conditions, but they may also amplify financial instability when exchange rate pressures intensify, according to new research by IMF economist Brandon Joel Tan.

The study argues that stablecoins such as Tether (USDT) create a state-dependent effect. During stable periods, they help households access foreign currency more efficiently, improving welfare and market efficiency. However, when a country's official exchange rate becomes significantly misaligned with the market, the same stablecoins can accelerate capital flight by giving everyone access to the same real-time price signal.

In economies with strict foreign exchange controls, official rates often differ sharply from parallel market prices, leaving traders to rely on fragmented quotes from brokers, banks, and street dealers. Tan explains that dollar-pegged stablecoins change this dynamic by offering a transparent, continuously updated exchange rate that becomes a widely accepted benchmark for the parallel dollar market.

While this improved price discovery helps individuals protect their savings, it also enables market participants to react simultaneously, increasing the likelihood of coordinated runs on the local currency.

Bolivia offers a recent example. After the country's central bank eased restrictions on virtual asset transactions in June 2024, activity within the financial system increased twelvefold between July 2024 and May 2025. During that period, the USDT-to-boliviano exchange rate became a common reference for the parallel dollar market, with Bolivia's central bank eventually publishing USDT prices on its website.

Using simulations across three economic models, Tan found that average crisis exposure rises from 3.9% in a cash-only economy to 7.4% in a fully developed stablecoin market. Under severe exchange rate misalignment, crisis risk increases from 4.8% to 12.9%.

The research also shows that welfare gains peak at roughly 1.2% during stable conditions but turn negative once exchange rate misalignment exceeds about 0.59, eventually reaching a loss of 6.3% in extreme scenarios.

Tan recommends a state-contingent regulatory approach that preserves low-cost stablecoin access during normal periods while introducing temporary, targeted measures to slow large-scale outflows during times of severe market stress. He also emphasizes that stablecoin regulation should complement—not replace—sound macroeconomic policies.

The IMF noted that the paper reflects the author's research and not the institution's official policy position, though its findings contribute to ongoing global discussions on stablecoin regulation.