IMF Unveils Guidelines for Managing Stablecoin Risks Beyond Official Regulations

IMF Analysis of Stablecoins: The IMF's report on stablecoins highlights the need for global regulatory cooperation to address risks associated with their growth, noting that while they can enhance financial access and innovation, they also pose challenges like currency substitution and market volatility.

Divergent Regulatory Frameworks: The introduction of the US GENIUS Act and the EU's MiCA has led to distinct regulatory environments for stablecoins, creating separate liquidity pools and potentially increasing cross-border settlement issues and regional arbitrage.

Market Composition and Risks: The majority of stablecoins are pegged to the US dollar, with significant reserves held in short-term US Treasuries. However, the lack of interoperability among various stablecoins raises concerns about market inefficiencies and regulatory disparities.

Concerns Over Banking Risks: The EU's MiCA framework, which mandates that a substantial portion of issuer reserves be held in EU banks, has faced criticism for potentially introducing systemic risks, as banks may lend out a significant portion of these deposits.