Credit rating agency Moody's Ratings has raised alarms about the rapid adoption of stablecoins in emerging markets, warning that it could lead to 'cryptoization'—a trend where digital tokens pegged to fiat currencies like the US dollar are used in place of traditional money. This phenomenon threatens to undermine central banks' control over monetary policies, including interest rates and exchange rate stability, and could destabilize bank deposits as individuals shift savings to crypto wallets.
Fewer than a third of countries worldwide have comprehensive digital asset regulations, leaving many economies exposed to financial instability. The report highlights that fragmented global rules increase risks of 'runs on reserves' if stablecoin pegs collapse, potentially forcing costly government bailouts.
Stablecoin adoption is growing fastest in emerging markets such as Latin America, Southeast Asia, and Africa, driven by use cases like inflation hedging, mobile payments, and remittances. In contrast, advanced economies like the European Union and the United States are making regulatory progress; the EU's Markets in Crypto-Assets (MiCA) framework took full effect in December 2024, while the US GENIUS Act became law in July 2024, setting standards for stablecoin issuance. China, after banning crypto trading in 2021, is now exploring yuan-backed stablecoins and expanding its digital yuan pilot.