Rating agency Moody's has warned that the wave of "encryption" driven by stablecoins is posing an increasingly severe challenge to the monetary sovereignty and financial stability of emerging markets.
Moody's recently released a report emphasizing that emerging markets face the risk of eroding monetary sovereignty as adoption of cryptocurrencies, including stablecoins, accelerates globally. This trend of cryptocurrencies, anchored to fiat currencies like the US dollar, is leading to widespread use, weakening central banks' ability to control interest rates and exchange rates.
The report explicitly states that if individuals shift their savings from domestic bank deposits to stablecoins or crypto wallets, the banking system could face the risk of "deposit loss." Moody's stated that such capital outflows not only affect bank liquidity but also pose a potential threat to overall financial stability.
Data shows that by 2024, the number of digital asset owners worldwide will reach approximately 562 million, a 33% increase from the previous year. Moody's emphasizes that while the popularity of crypto assets in developed economies is largely driven by clear regulations and improved investment channels, the fastest growth is in emerging markets such as Latin America, Southeast Asia, and Africa, driven primarily by remittances, mobile payments, and demand for hedging against inflation.
The risks of “encryption” are increasing
Moody's believes that the core risk of "encryption" lies in its erosion of a country's monetary policy independence and financial system stability.
The report states that when a large amount of economic activity is conducted through stablecoins, the central bank's ability to manage the economy by adjusting interest rates will be weakened. At the same time, if dollar-denominated stablecoins become a mainstream transaction medium, it will directly impact the stability of the national currency's exchange rate.
In addition, Moody's warned that stablecoins themselves pose systemic risks.
The report points out that although stablecoins are considered relatively safe, their rapid growth has also introduced systemic vulnerabilities: insufficient supervision may trigger a run on reserves, and if an unpegged currency occurs, it may force the government to take costly rescue measures.
Unbalanced growth and regulatory gaps
The global adoption of crypto assets shows significant regional imbalances, while regulatory lags exacerbate the risks faced by emerging markets.
Moody's highlighted in its report that the current regulatory landscape is extremely fragmented. Data shows that less than one-third of countries globally have implemented comprehensive digital asset rules, leaving many economies directly exposed to market volatility and systemic shocks.
This regulatory divide contrasts sharply with the divergence in growth patterns: crypto adoption in developed markets is more focused on investment, while adoption in emerging markets is driven by practical needs, such as cross-border remittances and hedging against inflation in their own currencies.
Moody's believes that this divergence demonstrates the potential of digital assets in inclusive finance, but also highlights the accumulating risks of financial instability if regulation fails to keep pace.
