A new International Monetary Fund (IMF) working paper finds dollar stablecoins can amplify currency runs in economies defending an overvalued fixed exchange rate, turning fragmented parallel-market prices into a single signal that lets households exit at once.
IMF researcher Brandon Joel Tan describes a state-dependent effect. Stablecoins raise welfare during calm periods but deepen crisis risk once a peg becomes badly misaligned, the paper argues.
How Stablecoins Turn Scarcity Into a Public Signal
When a government holds an official rate away from the market level, foreign currency gets rationed. Buyers then turn to parallel markets for dollars.
Those markets stay fragmented. Street dealers, brokers, and banks quote different prices, and no single figure captures true scarcity. The IMF research shows that stablecoins change that.
A dollar-pegged token such as Tether (USDT) trades against local currency on exchanges. That price is visible and updates constantly, so it becomes a common reference for the parallel dollar.
Better price discovery helps households hedge. However, the same public price can coordinate an exit, because everyone reacts to the same number at the same time.
“Stablecoins generate a state-dependent welfare effect. They expand access to foreign-currency and can improve allocation by making beliefs about misalignment more informative, but the same public price can also coordinate runs by making beliefs and actions more synchronized,” the abstract reads.
Bolivia illustrates the shift. The central bank lifted restrictions on virtual-asset transactions in June 2024. Such transactions in the financial system then multiplied twelvefold from July 2024 to May 2025.
The USDT to boliviano rate then became the everyday reference for the parallel dollar. The central bank even began publishing USDT prices on its website.
Follow us on X to get the latest news as it happens
What the Model Shows and What Tan Recommends
Tan simulates three economies to isolate the effect. He compares three setups. The first is a cash-only market. The second is a stablecoin market that only cuts access costs. The third also sharpens the public price.
Average crisis exposure rises from 3.9% in the cash-only economy to 7.4% in the full stablecoin economy. At the most severe misalignment, it climbs from 4.8% to 12.9%.
That gap between the second and third economies is Tan’s key point. Cheaper access makes exit easier to execute. A precise public price makes exit coordination easier, and the coordination effect drives most of the added risk.
Welfare tells a two-sided story. The gain peaks near 1.2% during calm conditions. It then turns negative past a misalignment threshold around 0.59. It reaches-6.3% at the extreme.
Therefore, Tan says broad restrictions can be regressive, since they remove a low-cost dollar option from unbanked households. Meanwhile, he stresses that stablecoin rules cannot replace macroeconomic adjustment.
“The model points to a state-contingent approach: preserve low-cost access in normal states, and use temporary, targeted frictions on large or run-like flows when misalignment is high,” he said.
IMF working papers reflect the author’s research, not the institution’s official position. Still, the analysis adds weight to a live regulatory debate as governments draft stablecoin frameworks.
Subscribe to our YouTube channel to watch leaders and journalists provide expert insights