Stablecoin Boom risk “encrypts” in emerging markets

Emerging markets face risks of monetary sovereignty and financial stability as stablecoins adoption accelerates, according to a new report from Moody’s Ratings.

Credit rating services warn that the widespread use of stablecoins – a token (token 1:1) pegged to another asset (usually a Fiat currency like the US dollar) – can undermine central banks’ control over interest rate and exchange rate stability, a trend called “cryptography.”

Banks can also “face erosion if an individual transfers savings from domestic bank deposits to a stable wallet or crypto wallet,” the report said.

Moody’s said digital asset regulations around the world remain fragmented, with less than a third of countries implementing integrated rules, exposing many economies to volatility and systemic shocks.

While regulatory clarity and enhanced investment channels often drive adoption in advanced economies, Moody’s said emerging markets are growing the fastest, especially in emerging markets in Latin America, Southeast Asia and Africa, where usage comes from remittances, mobile payments and inflation hedging.

“(…) The rapid growth of stable bacteria, despite their belief in safety, introduced the vulnerability of the system: If Pegers collapses, insufficient oversight could trigger reserves and huge government bailouts,” Moody said.

The agency said the difference not only highlights the potential for financial inclusion, but also the growing risk of financial instability if supervision fails to maintain pace.

In 2024, global digital asset ownership is estimated to reach 562 million people, an increase of 33% over the previous year.

Related: Singapore’s new crypto rules: $2 million fine, prison risk

European, US and China regulations accelerate

While most of the world still lack clear regulations on cryptocurrencies and stablecoins, Europe, the United States, and even China have been making progress over the past year.

After being launched in stages, on December 30, 2024, the remaining regulations (MICA) system for the EU market was implemented. Mica is the Group’s encryption rulebook that standardizes the licensing of service providers and sets reservation and disclosure requirements for Stablecoins.

In the United States, the Genius Act became law on July 18, establishing mandatory standards for issuance and support of stablecoins.