The International Monetary Fund urged internationally coordinated regulation to respond to the spread of stablecoins and warned of risks of currency substitution and unstable capital flows in emerging markets.

On Aug. 31, Coinpost, a blockchain media outlet, reported that IMF Managing Director Kristalina Georgieva (크리스탈리나 게오르기에바) said at the Jackson Hole economic policy symposium in Wyoming on Aug. 28 that stablecoins and tokenisation can make cross-border payments faster and cheaper, but international regulatory coordination is needed to match them.

She said that as geopolitical fragmentation deepens, the financial system is becoming more fluid. Tokenisation and stablecoins could make international finance more flexible, but she stressed that regulation and macroeconomic policy are becoming more important because financial risks can spread faster.

She said emerging markets may be vulnerable to shocks from the spread of stablecoins. She warned that stablecoins could excessively weaken banks' financial intermediation function, be used for tax evasion, or promote currency substitution. In countries that rely on capital controls, she said the effectiveness of existing tools could also decline.

Georgieva said about 1 in 4 IMF member countries still rely on capital controls. She said weakening such controls could expose countries to risks including currency substitution, volatility in capital flows, exchange rate instability and weakened monetary sovereignty. She stressed that central banks should maintain sound domestic banking systems and bolster foreign exchange reserves.

She also raised the responsibility of countries that issue stablecoins. She said countries supplying reserve assets for stablecoins, especially the United States, cannot be exempt from macroeconomic policy discipline. Citing an analysis by economist Kenneth Rogoff (케네스 로고프), she said dollar-pegged stablecoins could become a new channel for absorbing about $15 trillion in dollars outside the United States.

She drew a line, saying that even if demand for stablecoins can partly lower the issuer country's financing costs, it cannot replace responsible macroeconomic policy. She said that even if stablecoins could broaden the demand base for government bonds, it does not mean adjustments to secure fiscal soundness can be avoided.

Georgieva also mentioned rising government bond yields in major countries. She said 10-year government bond yields in the United States, France and Japan are at their highest levels since 2007, 2008 and 1996, respectively. She said rising government bond yields can affect other countries' borrowing costs and increase fiscal pressure.

On monetary policy, she stressed that central banks must make price stability their top priority. She said they should not become so-called “monetary policy cowboys” by keeping policy rates below appropriate levels or launching new asset purchase programmes to support fiscal issues. She said fiscal issues should be addressed through fiscal adjustments such as spending cuts and tax increases rather than through monetary policy.

The remarks came as views grow that see stablecoins as a means to improve cross-border payment efficiency and expand dollar circulation, while concern also grows about risks to financial stability and monetary sovereignty.