Dollar stablecoins are often praised as a safety net for citizens in countries struggling with troubled currencies. But a recent working paper from the International Monetary Fund (IMF) highlights a rarely discussed side: the very same tool could turn into a catalyst that accelerates capital flight from local currencies when a crisis strikes.
The paper, titled “Stablecoins and Fragility in Fixed Exchange Rate Regimes” by economist Brandon Joel Tan, models how stablecoins affect parallel foreign exchange markets in countries where official dollar access is strictly rationed.
A Lifeline on One Side
The findings are two-pronged. On one hand, stablecoins genuinely help people obtain dollars when banks or official exchange channels cannot meet demand. This is not mere theory. The paper points to real-world examples: in June 2025, several retailers at a Bolivian airport were seen benchmarking product prices to USDT, while still accepting US dollars or bolivianos. Earlier in Argentina, citizens used underground ‘crypto caves’ to convert pesos into dollar stablecoins at rates closer to the informal market - a survival tactic as the peso’s value steadily eroded.
A Catalyst on the Other
The problem arises when pressure on the domestic currency peaks. Tan argues that stablecoins make “dollar-like claims more accessible” while creating a visible, fast-moving price for dollar demand. When a country’s official exchange rate diverges sharply from the market rate, that price can act as a signal of dollar scarcity that pushes crowds to abandon the local currency all at once. In other words, a price screen watched by everyone can trigger collective panic. As a result, Tan suggests regulators may need to temporarily restrict unusually large or clearly panic-driven transactions.
This warning echoes concerns from other regulatory bodies. The Financial Stability Board (FSB) previously warned that dollar stablecoins could expose emerging economies to currency substitution, weakened monetary policy, and evasion of capital controls. For readers in regions like Southeast Asia, this tug-of-war is why the stablecoin debate is far from a simple matter of ‘good’ or ‘bad’. The same technology can serve as a shield for an individual’s savings while accelerating shocks to their national currency - and the dividing line between the two is often razor-thin.
Reported by Cointelegraph.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
