As the adoption of stablecoins and cryptocurrencies surges globally, emerging economies face increasing risks to their monetary control and financial stability, reveals a recent Moody’s Ratings report.
Stablecoins, which are digital tokens pegged typically one-to-one against fiat currencies like the US dollar, pose a challenge to central banks’ ability to regulate interest rates and maintain exchange rate stability. This phenomenon, termed cryptoization, could disrupt traditional monetary policies.
Moreover, banks in these regions might suffer deposit declines as savers opt to transfer funds from conventional bank accounts to stablecoins or crypto wallets, shifting the financial landscape significantly.
Globally, regulatory approaches to digital assets remain inconsistent, with less than a third of countries establishing comprehensive frameworks. This regulatory fragmentation exposes many economies to financial volatility and systemic risks.
While more developed markets see crypto adoption driven by clearer rules and investment avenues, the fastest growth is in emerging markets such as Latin America, Southeast Asia, and Africa, fueled by remittance flows, mobile payments, and efforts to hedge inflation.
However, Moody’s cautions that despite their stable reputation, rapidly expanding stablecoins bring systemic vulnerabilities. Inadequate oversight risks triggering reserve runs and expensive government bailouts should peg values falter.
The divergence in global crypto regulation highlights the potential for increased financial inclusion but simultaneously raises concerns over mounting financial instability risks if monitoring and supervision do not evolve accordingly.
As of 2024, it is estimated that 562 million people worldwide own digital assets, marking a 33% increase from the previous year.
Regulatory progress is underway in major economies. Europe finalized implementation of its Markets in Crypto-Assets (MiCA) regulation by the end of 2024, unifying licensing protocols and stablecoin reserve and disclosure mandates across EU member states.
In the US, the GENIUS Act became law in July 2025, setting enforceable standards for the issuance and backing of stablecoins.
China, after previously banning crypto trading and mining in 2021, is shifting focus by advancing pilots for its digital yuan and considering regulated yuan-backed stablecoins as part of its international financial strategy.
Recently, the People’s Bank of China inaugurated a new blockchain service center in Shanghai to bolster digital yuan operations, especially in cross-border payments, signaling institutional support for controlled stablecoin innovations.
