IMF Stablecoins Report: Threats to Financial Stability and India's e-Rupee Strategy
SDG 9: Industry, Innovation, and Infrastructure | SDG 17: Partnerships for the Goals
Reserve Bank of India (RBI) | Ministry of Finance
The IMF Departmental Paper, “Understanding Stablecoins” (2025), provides a comprehensive overview of this rapidly growing form of digital asset, highlighting both its potential benefits for payment efficiency and its significant risks to macroeconomic and financial stability. Stablecoin issuance has doubled over the past two years, with the market capitalization exceeding USD $280 billion, driven by their use in crypto trading and as a bridge between conventional finance and the crypto ecosystem.
Key Risks and Policy Challenges:
Financial Stability Risk: Stablecoins can function well in good times but are vulnerable to “de-pegging” (loss of stable value) and sudden runs under stress, threatening financial stability, especially given their increasing interconnection with non-bank financial institutions (NBFIs).
Monetary Policy and Sovereignty: Widespread global adoption of stablecoins, particularly those pegged to the US dollar, could lead to “dollarization” (where the dollar is used in parallel with the local currency) and threaten the effectiveness of a country’s monetary policy.
Illicit Activity: Stablecoins carry significant financial integrity risks related to money laundering, terrorist financing, and tax evasion.
Global Fragmentation: The global nature of stablecoins means risks are amplified by a fragmented regulatory landscape, making international cooperation essential to prevent arbitrage.
Policy Relevance for India
This report is critically relevant to the Reserve Bank of India (RBI) and the Ministry of Finance, as it directly impacts India’s strategy for digital currency and financial stability:
Protecting the e-Rupee: The widespread use of dollar-pegged stablecoins could undermine the RBI’s ongoing pilot of the e-Rupee (CBDC) and threaten India’s monetary sovereignty, creating competition for deposits and potentially weakening the banking system.
The Regulatory Gap: While India has strict rules on crypto, a fragmented global framework (as noted by the IMF) means the cross-border flow of stablecoins remains a challenge for enforcing domestic laws, requiring the government to work through international bodies like the Financial Stability Board (FSB) and G20.
Actionable Framework: The IMF and FSB advocate the principle of “same activity, same risk, same regulation,” which provides a clear legal and policy baseline for India to regulate stablecoin activities that mimic traditional banking and payments.
What are Stablecoins?→ Stablecoins are a type of crypto asset designed to maintain a stable value relative to a reference asset, most commonly the US dollar, by holding liquid assets such as US Treasuries or bank deposits as collateral. They operate on programmable blockchain platforms, offering the potential for faster and cheaper cross-border payments.
Follow the full news here: Understanding Stablecoins - International Monetary Fund (2025)