An International Monetary Fund (IMF) working paper reveals that dollar stablecoins can amplify currency runs in economies defending an overvalued fixed exchange rate. According to the research by IMF economist Brandon Joel Tan, stablecoins create a state-dependent welfare effect that expands access to foreign currency during calm periods but deepens crisis risk when currency pegs become badly misaligned. The paper demonstrates how stablecoins transform fragmented parallel-market prices into a single, coordinated signal that allows households to exit simultaneously.
The IMF research shows how stablecoins fundamentally alter currency market dynamics. When governments maintain official rates away from market levels, foreign currency gets rationed, driving buyers to parallel markets where street dealers, brokers, and banks quote different prices. However, as reported by the IMF, dollar-pegged tokens such as Tether (USDT) trade against local currency on exchanges with visible, constantly updating prices, creating a common reference that becomes the everyday reference for the parallel dollar. This improved price discovery helps households hedge but also enables coordinated exits when beliefs and actions become synchronized across the market.
Bolivia illustrates the transformative impact of stablecoins on currency markets. According to the IMF paper, the central bank lifted restrictions on virtual-asset transactions in June 2024, after which such transactions in the financial system multiplied twelvefold from July 2024 to May 2025. The USDT to boliviano rate became the everyday reference for the parallel dollar, with the central bank even beginning to publish USDT prices on its website. This case demonstrates how stablecoins can rapidly transform previously fragmented parallel markets into coordinated, public price discovery mechanisms.
The IMF simulations reveal significant increases in crisis exposure across different market scenarios. As reported by the research, average crisis exposure rises from 3.9% in a cash-only economy to 7.4% in a full stablecoin economy, with the gap between cheaper access and precise public pricing driving most of the added risk. At the most severe misalignment levels, crisis exposure climbs from 4.8% to 12.9%, demonstrating how stablecoins amplify the coordination effects of currency runs. The research shows that welfare gains peak at 1.2% during calm conditions but turn negative past a misalignment threshold of 0.59, reaching -6.3% at extreme levels.
The IMF research advocates for a state-contingent regulatory approach that balances accessibility with crisis prevention. According to the paper, broad restrictions can be regressive since they remove low-cost dollar options from unbanked households, while stablecoin rules cannot replace macroeconomic adjustment. As reported by the IMF, the model suggests preserving low-cost access in normal states while using temporary, targeted frictions on large or run-like flows when misalignment is high. This approach recognizes that while stablecoins offer significant benefits during stable conditions, they require careful regulatory calibration to prevent amplifying currency crisis risks during periods of economic stress.
