Key Highlights
- Stablecoins have grown rapidly, with the top two reaching a market value of $ 260 billion and a trading volume of $23 trillion, according to the IMF.
- They can make international payments faster, cheaper, and more accessible.
- However, risks like currency substitution and illegal use can make stablecoins unsafe without proper rules.
Stablecoins are gaining influence despite having a market value of only about 10 percent of Bitcoin, according to the International Monetary Fund (IMF).
In its report, the IMF noted how the growth of the currencies could, in the long run, push banks and institutional investors toward tokenization, a process that could reshape how payments and financial services operate globally.
Tokenized liabilities, combined with blockchain-based payment rail upgrades, would allow banks to offer:
- near-instant cross-border transfers
- transparent and programmable settlement
- reduced counterparty risk
$260 billion in market cap in two years
According to the IMF, the stablecoin market has surged in value and usage over the past two years, driven by its links to mainstream financial markets and the different ways they have been adopted.
Most stablecoins are centralized, meaning they are run by specific companies and backed by conventional assets like cash or government securities. They are created to prevent the volatility that can be experienced by other currencies, such as Bitcoin, which makes them very useful for cross-border transactions.
The report noted that the two largest stablecoins, Tether (USDT) and Circle (USDC), had grown by three times their value back in 2023 and currently stand at around $260 billion, with trading volumes up by 90 percent, reaching $23 trillion as of 2024.
The Asia market shows the highest trading activity, but Africa, Latin America, and the Middle East show high activity compared to their economies, with most transactions coming from North America to other regions.
Additionally, these stablecoins are used mainly for trading crypto, but their use for sending money across borders is increasing day by day. SWIFT remittances, which are standard abroad for remitting funds, are often costly and inefficient, and it takes several days for the transfer to be completed, which incurs up to 20 percent in charges. Stablecoins can simplify the process because blockchain acts as a single source of information, which reduces cost and delays.
Opportunities and risks beyond payments
In the report, the IMF addressed the advantages of stablecoins, saying they could help people who do not have access to banks, making it easier to make payments, especially in places where banks are few.
However, the IMF also reported that stablecoins carry risks. If the value of reserve assets depreciates and the users no longer trust them, the market could drop. In addition, people might start using stablecoins instead of their local money, which could make it harder for central banks to control the economy.
Furthermore, they can be misused to bypass regulations and be used for illicit purposes, like money laundering. Regulations for this kind of currency are still in development. However, the IMF said it is working with the Financial Stability Board to create standards and cooperation to manage risks and protect the people.
The agency also noted that stablecoins and tokenization are likely to stay, but the future is still not clear. Some companies may become global leaders, and banks are testing how to use stablecoins. Improving payments may also need better traditional systems, so the best results come from using new technology and old systems together.
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