IMF Calls for International Coordination on Stablecoin Regulation, Warns of Threats to Financial Sovereignty in Emerging Markets

IMF on Stablecoin Regulation: Warning of Accelerating International Finance and Potential Risks

At the Jackson Hole Economic Policy Symposium held in Wyoming, USA, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), delivered a speech regarding the liquidity of the financial system.

The tokenization of digital assets and the advancement of stablecoins have the advantage of dramatically improving the efficiency of international remittances, which have traditionally been high-cost and time-consuming. However, the increase in payment speed also accelerates the transmission of market volatility and operational risks, highlighting the reality that regulatory frameworks in various countries are not keeping pace with the speed of change.

The Wave of "Currency Substitution" Threatening Emerging Markets

Particular concern was expressed regarding the impact on economically vulnerable emerging and developing countries. As stablecoins linked to major currencies like the US dollar become established, there is a higher likelihood of a phenomenon where domestic currencies are shunned and substituted (currency substitution).

This not only diminishes the effectiveness of monetary policy but also risks increasing tax evasion and undermining capital controls, ultimately jeopardizing the financial sovereignty and fiscal stability of various countries. To counter these risks, the IMF is urging member countries to strengthen supervision of domestic banks, expand foreign reserves, and pursue effective fiscal consolidation without relying on easy low-interest policies.

Fiscal Discipline and International Rules Required from Issuing Countries

The expansion of dollar-denominated stablecoins is expected to serve as a new means of utilizing the vast amounts of dollar funds existing abroad, potentially lowering the cost of financing for the United States to some extent.

However, Georgieva argued that this cannot serve as a substitute for appropriate macroeconomic policies. Amidst persistently high long-term interest rates in major countries, she emphasized the importance of central banks strictly sanctioning easy monetary easing for fiscal support, and that governments themselves must engage in expenditure reviews and tax reforms.

Currently, the Bank for International Settlements (BIS) is focusing on central bank digital currencies and deposit tokens, while the European Central Bank (ECB) is taking its own approach, revealing slight differences in response strategies among major institutions. Nevertheless, there is a consensus that to close global money laundering loopholes and ensure the transparency of issuance reserves, it is essential to establish a stringent and unified international regulatory framework.

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