The post IMF Warns Tether Stablecoins Can Lift Currency-Crisis Risk to 12.9% appeared on BitcoinEthereumNews.com.
Crypto News The International Monetary Fund has warned that dollar-pegged stablecoins can intensify currency runs in economies that defend an overvalued fixed exchange rate. In a newly published working paper we have reviewed, IMF researcher Brandon Joel Tan describes a state-dependent effect: these tokens raise welfare during calm periods, yet they deepen crisis risk once a peg becomes badly misaligned. The core danger, our reading of the paper shows, is coordination. Fragmented parallel-market prices collapse into a single, constantly updated figure that lets households exit at the same moment. The finding reframes dollar tokens as both a hedging tool and a systemic accelerant for fragile pegs. The paper details how the mechanism works. When a government holds an official rate far from the market level, foreign currency is rationed and buyers move to parallel markets for dollars. Those markets stay fragmented — street dealers, brokers and banks quote different prices, and no single number captures true scarcity. Dollar-pegged tokens change that. Because a coin such as Tether (USDT) trades against local currency on exchanges with a visible, continuously updating price, it becomes a common reference for the parallel dollar. Better price discovery helps households hedge, but the same public figure can coordinate an exit when everyone reacts to it simultaneously. Tan frames the trade-off as two-sided. Making beliefs about misalignment more informative improves allocation, which is why welfare gains peak near 1.2% during calm conditions. Yet the same transparency synchronizes behavior. Once the peg crosses a misalignment threshold around 0.59, the welfare effect turns negative and reaches roughly minus 6.3% in the most extreme scenarios. In other words, the feature that lets a saver in a distressed economy read the true price of the dollar is also the feature that can turn a slow drain into a simultaneous stampede. The…