Crypto safety nets in countries facing crises may threaten the stability of monetary regulation

Moody’s has cautioned that the growing use of cryptocurrencies in developing economies could threaten monetary independence and financial stability, especially as U.S. dollar-pegged stablecoins become more widespread. In a recent analysis, the credit rating agency pointed out that the rising popularity of digital assets—most notably stablecoins—for transactions, pricing, and savings may disrupt the effectiveness of local monetary policy. By 2024, global crypto users were estimated at 562 million, marking a 33% jump from 2023, with the highest adoption rates in Southeast Asia, Africa, and certain Latin American countries Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ]. These areas, which often face inflation, volatile currencies, and limited access to banking, have seen digital currencies become alternatives to conventional financial services Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ].

The report notes that stablecoins, which are linked to fiat currencies such as the U.S. dollar, are fueling “cryptoization” trends similar to unofficial dollarization, but with less transparency and weaker regulation. This issue is particularly pronounced in places where crypto is used for daily financial needs like remittances and savings, not just speculation. For example, in Argentina and Turkey—where inflation has recently surpassed 100% and 50% respectively—people are increasingly turning to stablecoins to shield their assets from local currency depreciation Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ]. While this can provide short-term relief, it undermines reliance on national currencies and hampers central banks’ ability to steer monetary policy in the long run Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ].

Moody’s further expressed concern that cryptocurrencies can facilitate capital outflows through anonymous wallets and offshore platforms. These mechanisms allow users to quietly move funds abroad, putting pressure on exchange rates and complicating macroeconomic management. The Financial Stability Board (FSB) has also highlighted these dangers, warning that stablecoins could bypass capital controls in countries with restricted financial systems, increasing economic vulnerabilities. Although stablecoins currently make up a small share of global finance, their projected growth—to $4 trillion in cross-border transactions after the GENIUS Act—makes addressing these risks increasingly urgent Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ].

The uptake of crypto in developing regions is fueled by both economic hardship and greater access to technology. In areas where banking services are scarce, digital currencies provide a way to overcome traditional financial obstacles. For instance, Nigeria and Vietnam have seen a surge in crypto use for international remittances, as conventional methods are often costly and slow. In Argentina, stablecoins have become essential for families trying to maintain their purchasing power amid soaring inflation Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ]. However, this dependence on decentralized finance could further fragment financial systems and weaken the impact of national monetary policies Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ].

These risks are heightened by the absence of clear regulations and robust infrastructure in many developing economies. Unlike wealthier nations, where crypto adoption is supported by established institutions and regulatory systems, emerging markets often lack the legal and technical protections needed to manage crypto-related threats. This leaves them more exposed to volatility, scams, and systemic disruptions.

urges regulators to strengthen oversight of stablecoins and crypto transactions to reduce risks while still encouraging innovation Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ]. The FSB has likewise advocated for coordinated global action on stablecoin issues, stressing the need for unified rules to avoid cross-border problems .

As digital asset adoption accelerates, the relationship between economic challenges and technological progress will influence its future. While cryptocurrencies can help address financial exclusion and currency instability, their potential to disrupt monetary systems remains a concern. Policymakers in developing countries must balance fostering inclusive finance with protecting economic stability. The next few years will reveal whether regulations can adapt to capture crypto’s advantages without magnifying its dangers Crypto Adoption in Emerging Markets Poses Risks to Financial Resilience: Moody's [ 1 ].