Moody’s warns stablecoin adoption in emerging markets risks weakening monetary control, fueling capital flight, and triggering systemic shocks.
Moody’s Ratings has cautioned that rising stablecoin adoption, especially USD-linked tokens, poses growing risks to financial stability in emerging markets. The report warns of “cryptoization,” where cryptocurrencies replace domestic money, weakening central banks’ ability to control exchange rates, interest rates, and money supply.
Stablecoins power remittances, cross-border trade, and savings, but they also create risks: deposit erosion from banks, capital flight through offshore exchanges, and systemic shocks if a major stablecoin loses its peg. Countries like Lebanon and Argentina already show how citizens bypass currency controls using crypto.
Africa, Latin America, and Southeast Asia face the greatest risks due to inflation, weak currencies, and regulatory gaps. While the EU, U.S., and China are tightening oversight, most African nations lack clear frameworks.
Moody’s concludes stablecoins are evolving into a parallel financial system, demanding urgent regulation.
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