As stablecoins continue to gain worldwide momentum, the International Monetary Fund (IMF) has called for global cooperation to avert potential macro financial stability risks related to the rapidly growing sector and to turn the industry “into a force for good.”

Stablecoins To Foster Innovation, Financial Inclusion

On Thursday, the IMF released a 56-page report discussing the growing influence of stablecoins, their potential use cases in mainstream financial markets, and the risks associated with the sector’s varying oversight.

Amid the sector’s rapid growth, the organization highlighted that the two largest stablecoins, USDT and USDC, have tripled their market capitalization since 2023, reaching a combined $260 billion. Meanwhile, their trading volume has increased by around 90% to $23 trillion in 2024, with Asia surpassing North America in stablecoin activity volume.

The IMF noted two major potential benefits from stablecoins. First, they could enable faster and cheaper cross-border payments, especially for remittances, which can cost 20% of the amount being sent and face some delays.

However, “being a single source of information, blockchains can greatly simplify the processes linked with cross-border payments and reduce costs,” the Fund’s economists explained in a blog post.

Second, stablecoins could expand financial access, driving innovation by increasing competition with established payment service providers, therefore, making retail digital payments more accessible to underserved customers.

They could facilitate digital payments in areas where it is costly or not profitable for banks to serve customers. Many developing countries are already leapfrogging traditional banking with the expansion of mobile phones and different forms of digital and tokenized money.

Notably, competition with already established providers could lower costs and lead to enhanced product diversity, “leveraging synergies between digital payments and other digital services.”

IMF Warns Of Fragmented Oversight

Despite their potential benefits, stablecoins also carry significant risks, the IMF explained, including de-pegging and collapsing if the underlying assets lose value or if users lose confidence in the ability to cash out. Per the report, this could also trigger fire sales of the reserve assets and disrupt financial markets.

Stablecoins could also accelerate a “currency substitution” dynamic, where individuals and companies abandon their national currency in favor of a foreign one, like US dollars or euros, due to instability or high inflation.

The organization noted that the dynamic decreases a country’s central bank’s ability to control its monetary policy and serve as the lender of last resort, damaging the financial sovereignty of affected nations.

In addition, the potential to reduce cross-border frictions and make faster and cheaper transactions could be undermined by a lack of interoperability if various networks are unable to connect or are restricted by different regulations and other hurdles.

“Stablecoin regulation is in its infancy, so the ability to mitigate these risks remains uneven across countries,” the organization affirmed, noting that “the IMF and the Financial Stability Board have issued recommendations to safeguard against currency substitution, maintain capital flow controls, address fiscal risks, ensure clear legal treatment and robust regulation, implement financial integrity standards, and strengthen global cooperation.”

As reported by Bitcoinist, the FSB vowed in October to address the evolving threats from private finance and the growing use of stablecoins, promising to increase the global watchdog’s policy response and overhaul its surveillance system to make it more flexible and quicker.

Nonetheless, major jurisdictions have taken different stances in key areas, as the IMF detailed, which could result in the exploitation of gaps between jurisdictions and issuers to locate where oversight is weaker.

All this underscores the need for strong international cooperation to mitigate macrofinancial and spillover risks (…). Tokenization and stablecoins are here to stay. But their future adoption and the outlook for this technology are still mostly unknown.

The organization concluded that “improving the existing global financial infrastructure might be easier than replacing it. Achieving the best possible balance will require close cooperation among policymakers, regulators, and the private sector.”

The IMF says large dollar stablecoins can accelerate currency substitution, weaken monetary control in fragile economies, and require strict, globally coordinated regulation and reserves. The International Monetary Fund published a paper warning that large foreign-currency stablecoins can accelerate currency substitution…

The International Monetary Fund on Thursday released a new global assessment of the stablecoin market, warning that fragmented regulatory frameworks across countries are now creating structural “roadblocks” that threaten financial stability, weaken oversight, and slow the development of cross-border payments.

In its report titled “Understanding Stablecoins,” the IMF reviewed how major economies, including the United States, the United Kingdom, the European Union, and Japan, regulate stablecoins and found that national approaches remain widely inconsistent.

Stablecoins have the potential to reshape cross-border payments and capital flows. They offer opportunities, but also bring new risks—financial integrity, regulatory oversight, consumer protection, capital flow management, monetary sovereignty, and more. Learn more:… pic.twitter.com/cOlZKuqLDF

— IMF (@IMFNews) December 4, 2025

While some countries treat stablecoins as securities, others regulate them as payment instruments, permit only bank-issued tokens, or leave large parts of the market unregulated.

Stablecoins Are Moving Faster Than Regulators Can Track, IMF Warns

The IMF said this regulatory patchwork allows stablecoins to move across borders faster than oversight can follow.

Issuers can operate from lightly regulated jurisdictions while serving users in stricter markets, limiting authorities’ ability to monitor reserves, redemptions, liquidity management, and anti-money laundering controls.

The fund warned that this creates regulatory arbitrage and weakens global supervision.

The report also pointed to technical fragmentation. Stablecoins increasingly operate across different blockchains and exchanges that are not always interoperable.

According to the IMF, this lack of coordination raises transaction costs, slows market development, and creates barriers to efficient global payments.

Differences in national regulatory treatment further complicate cross-border usage and settlement.

Stablecoins remain dominated by U.S. dollar-denominated tokens. The IMF said the global stablecoin market is now worth more than $300 billion. Tether’s USDT and Circle’s USDC make up the majority of that supply. About 40% of USDC’s reserves are held in short-term U.S. treasuries, while roughly 75% of USDT’s reserves are in short-term treasuries, with another 5% held in Bitcoin.

The concentration of reserves in government debt markets links stablecoins directly to traditional financial systems

Widespread use of foreign-currency stablecoins can weaken domestic monetary control, lower demand for local currency, and accelerate digital dollarization. Stablecoins also make it easier to bypass capital controls through unhosted wallets and offshore platforms.

In addition to monetary concerns, the fund cited broader financial stability concerns. Large-scale redemptions could force rapid sales of Treasury bills and repo assets, potentially disrupting short-term funding markets that are critical for monetary policy transmission.

The IMF also noted that the increasing interconnection between stablecoin issuers, banks, custodians, crypto exchanges, and funds also increases the risk of contagion spreading from digital markets into the wider financial system.

IMF Urges Unified Stablecoin Regulation as Cross-Border Risks Grow

To address these risks, the IMF released new global policy guidelines intended to reduce fragmentation. It called for harmonized definitions of stablecoins, consistent rules for reserve assets, and shared cross-border monitoring frameworks.

The fund said issuers should be subject to the principle of “same activity, same risk, same regulation,” regardless of whether the issuer is a bank, fintech company, or crypto platform.

The IMF also said stablecoins should be backed only by high-quality liquid assets such as short-term government securities, with strict limits on risky holdings. Issuers must guarantee full one-to-one redemption at par, on demand, at all times.

Strong international coordination on anti-money laundering enforcement, licensing, and supervision of large global stablecoin arrangements was also included in the new guidance.

The IMF’s warning comes as regulatory pressure is rising worldwide. In Europe, the European Central Bank recently warned that stablecoins, despite their small footprint in the euro area, now pose spillover risks due to their growing ties to U.S. Treasury markets.

The ECB warns that stablecoins are growing fast, now topping $280B, with rising spillover risks as USDT and USDC dominate 90% of the market. #Stablecoins #ECBhttps://t.co/ef16HZzqYL

— Cryptonews.com (@cryptonews) November 24, 2025

The European Systemic Risk Board has also called for urgent safeguards against cross-border stablecoin structures operating under the EU’s MiCA framework.

In China, the central bank has described stablecoins as a threat to financial stability and monetary sovereignty, while the Bank of England and Basel regulators are reassessing how banks should hold capital against stablecoin exposure as usage expands.

The IMF concluded that without consistent global regulation, stablecoins could bypass national safeguards, destabilize vulnerable economies, and transmit financial shocks across borders at high speed.

The post IMF Warns: Fragmented Stablecoin Rules Create “Roadblocks” – New Guidelines Released appeared first on Cryptonews.

The International Monetary Fund (IMF) has issued one of its strongest warnings yet on the rapid rise of tokenized markets, arguing that the technology could reshape global finance in unpredictable ways.

In a new explainer video published on its X account, the IMF said tokenization offers clear benefits such as cheaper and faster market infrastructure.

Tokenization can make financial markets faster and cheaper but efficiencies from new technologies often come with new risks. Watch our latest video to learn more. pic.twitter.com/hBsQxlhHFh

— IMF (@IMFNews) November 28, 2025

But it cautioned that the same features driving efficiency could also introduce new forms of volatility, including flash-crash-style events triggered by automated, instant settlement.

The video frames tokenization as the next major step in the evolution of money, comparing programmable digital tokens to earlier milestones such as shells, coins, banknotes, and today’s digital payments.

IMF Says Fragmented Tokenized Platforms Could Undermine Liquidity

According to IMF researchers, early models show “significant cost savings,” with near-instant settlement reducing asset-management expenses by as much as 20%, echoing estimates from institutions like J.P. Morgan.

However, speed brings risk. The IMF pointed to the 2010 flash crash that wiped out nearly $1 trillion in minutes, warning that tokenized markets, driven by smart contracts and automated execution, could amplify similar shocks.

Interconnected contracts, it said, may behave “like falling dominoes” during stress, turning localized disruptions into broader systemic events.

The IMF also warns of fragmentation if multiple tokenized platforms emerge without interoperability, weakening liquidity and limiting tokenization’s efficiencies.

The IMF argues that coordination and open systems are essential to prevent isolated ecosystems that cannot trade or settle with one another.

The institution also reminds that governments have never stepped aside during major shifts in the monetary system.

From the Bretton Woods restructuring in 1944 to the collapse of the gold standard three decades later, public institutions have repeatedly reshaped global finance when new models created new pressures.

“If history is any guide,” the IMF said, governments could take “a more active role” as tokenization expands.

Regulators Worldwide Move to Rein In Tokenized Assets Amid Rapid Growth

The IMF’s reminder of these turning points suggests tokenization could be heading toward a similar era of deeper state involvement.

Authorities aim to build legal and operational frameworks that manage risk rather than restrict tokenization outright.

Regulators worldwide, including the EU, Singapore, the U.K., and the United States, are clarifying how tokenized real-world assets should be treated, with most expected to fall under securities rules.

New requirements focus on investor protection and upgraded security standards for platforms operating smart-contract-based systems.

The push for clearer rules is expected to accelerate institutional adoption and deepen links between tokenized markets and traditional finance.

Governments are also becoming participants, with initiatives such as Singapore’s trials of tokenized government bills and wholesale CBDC transactions.

Regulators worldwide are already preparing for that shift. In August, the World Federation of Exchanges urged the U.S. SEC, the European ESMA, and IOSCO to tighten oversight of tokenized equities, warning that many offerings “mimic” stocks without offering shareholder rights or market safeguards.

The World Federation of Exchanges (WFE) warned global regulators that tokenized stocks “mimic” equities without offering shareholder rights or market trading safeguards.#WFE #TokenizedStocks #BlockchainTokenshttps://t.co/3UxpywsfMs

— Cryptonews.com (@cryptonews) August 26, 2025

Europe, one of the fastest-growing hubs for tokenized fixed-income assets, has also raised concerns. ESMA Executive Director Natasha Cazenave recently said tokenization could transform the region’s markets, but only if investor protections, settlement rules, and legal frameworks evolve with it.

Europe now hosts more than half of global tokenized fixed-income issuance, and officials are testing new structures, including state-backed tokenized debt and models linking distributed-ledger platforms to central-bank systems.

Tokenized securities trading gets a boost as @boersestuttgart completes @ecb blockchain tests, highlighting the benefits of efficiency, security, and reduced costs.#Securities #ECB #Tokenizationhttps://t.co/CyguveVgJr

— Cryptonews.com (@cryptonews) October 1, 2024

Private-sector expectations are rising as well. In October, former TD Ameritrade chairman Joe Moglia predicted that “every financial asset” will be tokenized within five years.

The post IMF Warns Tokenized Markets Trigger ‘Flash Crashes’ — Is Government Control Next? appeared first on Cryptonews.

• Researchers have identified cost savings in early tokenized systems.
• Smart contract chains can escalate local issues into wider shocks.
• Tokenized assets now form a multibillion-dollar global market.

The IMF released a new video on its X account today, placing tokenized markets at the centre of a major shift in how global finance operates.

Instead of treating tokenization as a niche experiment, the fund presents it as a structural development that is already influencing policy discussions, investor behaviour and the future shape of cross-border markets.

The video also stresses that new digital frameworks can create fragility, accelerate market shocks and draw governments back into a more active role in managing monetary transitions.

How tokenization changes market plumbing

The IMF video describes tokenization as the next step in money’s long transformation.

It highlights how digital tokens can replace long chains of intermediaries that currently handle verification, settlement and record-keeping.

Clearinghouses and registrars are replaced by functions written directly into code, allowing assets to move more quickly between holders.

Early studies cited in the video show meaningful cost reductions in tokenized environments.

These savings stem from programmability, near-instant settlement and more efficient use of collateral.

The IMF frames these features as changes to the core plumbing of financial markets, altering how value circulates through the system.

Why the IMF says risks are growing

Alongside these benefits, the IMF signals rising exposure to volatility.

Automated trading has already caused sudden drops known as flash crashes, and the video warns that these events can intensify when markets settle instantly.

Faster execution leaves less time for human intervention, increasing the likelihood that sharp swings spread across platforms.

The video also focuses on the risks built into complex smart contract chains.

When multiple layers of code interact during periods of stress, small disruptions can escalate into wider problems.

The IMF compares this behaviour to falling dominoes, where one malfunction triggers a broader shock.

A separate issue is market fragmentation. If competing tokenised platforms develop without shared standards, they may not interact smoothly.

The IMF warns that this could limit liquidity and reduce the efficiency that tokenisation aims to deliver.

Governments and the history of monetary change

The IMF places today’s tokenization wave within the long arc of government involvement in financial transitions.

It highlights the 1944 Bretton Woods agreement, when global powers redesigned the monetary order by linking exchange rates to the United States dollar and tying the dollar to gold.

This top-down structure defined international finance for a generation.

That system collapsed in the early 1970s when growing fiscal pressures made the gold peg impossible to maintain.

The move to fiat currencies and floating exchange rates changed how economies managed deficits and cross-border flows.

By referencing these episodes, the IMF emphasises that governments rarely remain passive when new forms of money emerge.

The post IMF flags rising risks as tokenized markets look to reshape global finance appeared first on CoinJournal.

Bitcoin Magazine

El Salvador Drops $100 Million on Bitcoin as Market Crashes

Some sell Bitcoin on the dips while others aggressively buy more — and so far, it’s the accumulators who’ve come out ahead, though only time will decide which strategy ultimately wins.

El Salvador is pressing ahead with its aggressive Bitcoin accumulation strategy despite one of the steepest market drawdowns of the year. The Central American nation purchased 1,091 BTC on Tuesday — nearly $100 million worth — according to data from the country’s Bitcoin Office. 

President Nayib Bukele later posted a screenshot on X confirming that the government accumulated 1,098.19 BTC over the past seven days, pushing total holdings to 7,474.37 BTC valued at roughly $688 million.

JUST IN: El Salvador buys $101 million worth of #Bitcoin for its strategic reserve.

El Salvador is buying the dip pic.twitter.com/V0IBHYl7jO

— Bitcoin Magazine (@BitcoinMagazine) November 18, 2025

The country continues to buy 1 BTC per day, a policy Bukele introduced in November 2022 and has maintained through every market cycle. The strategy has become a signature part of El Salvador’s approach to digital asset reserves, even as the IMF and other global institutions discourage further public-sector accumulation. 

Government disclosures show that the one-BTC-per-day program has steadily expanded reserves, and officials insist there are no plans to halt the buys.

Stacy Herbert, director of El Salvador’s Bitcoin Office, called Bitcoin “freedom, transparency, and individual empowerment,” saying the policy reflects a desire to distribute economic power rather than centralize it. Financial analysts note that El Salvador is now one of the few sovereign actors openly buying into market weakness.

The latest purchase also arrives as the Bukele administration deepens coordination with U.S. officials on digital-asset oversight. The president met with White House crypto adviser Bo Hines in June, part of ongoing discussions around regulations affecting cross-border Bitcoin activity.

El Salvador’s conviction comes during a brutal week for the broader market. Bitcoin plunged below $90,000 in Asian trading on Tuesday, dropping as much as 4.9% over 24 hours. At the time of writing, BTC trades near $91,768 currently, according to Bitcoin Magazine data. 

Short-term holders—wallets that have held coins for under 90 days—panic-sold roughly 148,000 BTC at a loss, the largest capitulation since April. Analysts say this selling mirrors behavior seen at previous market tops and may not be finished.

The sell-off accelerated after $19 billion in leveraged long positions were wiped out, triggering cascading liquidations. Bitcoin is now down more than 26% from its October all-time high near $126,000. 

If Bitcoin stabilizes in the $80,000–$90,000 zone, many believe El Salvador’s nine-figure buy could ultimately prove one of the sharpest macro calls of the year.

El Salvador’s Bitcoin background

El Salvador’s Bitcoin experiment has entered its fourth year, marking one of the most closely watched financial policy shifts in the world. 

The country made history in September 2021 when it became the first nation to adopt Bitcoin as legal tender, a move championed by President Bukele as a strategy to boost financial inclusion, attract investment, and modernize the economy. 

The rollout, supported by a state-run wallet called Chivo and various incentives, drew global attention as well as criticism from the IMF and traditional financial institutions concerned about volatility and fiscal risk.

As mentioned earlier, despite early technical challenges and a sharp market downturn in 2022, Bukele’s administration doubled down on its Bitcoin strategy, implementing daily BTC purchases, launching a “Bitcoin Office,” and pushing forward plans for Bitcoin-backed bonds and the proposed “Bitcoin City.” 

The government also committed to transparent reporting of its treasury address, allowing the public to track the nation’s on-chain holdings.

While the global debate over the policy remains unresolved, El Salvador’s Bitcoin-first approach has undeniably reshaped the nation’s economic narrative.

Bukele views El Salvador’s adoption of Bitcoin as a strategic move to boost the country’s global image, attract tourism, and spur investment, despite low domestic usage. He emphasizes that the goal was less about immediate adoption and more about repositioning El Salvador as a forward-looking, digitally innovative nation.

This post El Salvador Drops $100 Million on Bitcoin as Market Crashes first appeared on Bitcoin Magazine and is written by Micah Zimmerman.