By Daniel Makina and Rogers Dhliwayo
“To the extent stablecoins are considered money, deviation from par could undermine ‘singleness of money’, so that a unit of money would have different values between stablecoins and bank deposits, or currency” – Andrew Bailey, Governor of the Bank of England
The quote above encapsulates the primary challenge for ensuring that digital innovation does not lead to a fractured monetary system where “one dollar” is no longer equal to another. The principle of the “singleness of money” lies at the core of modern monetary systems, anchoring trust, price stability, and the effective transmission of monetary policy across the economy. The IMF report offers a comprehensive post-mortem of the initial crypto-asset boom and a roadmap for the integration of fiat-backed digital tokens into the global financial architecture. Rather than advancing radical or speculative policy prescriptions, the report consolidates emerging regulatory consensus and empirical lessons drawn from recent market stress episodes. While it primarily summarises the existing “state of play,” it provides a vital synthesis of how stablecoins are evolving from speculative “on-ramps” for crypto trading into institutionally relevant instruments for cross-border payments, settlement, and asset tokenisation.
The Shift Toward Fiat-Backed Pragmatism
The IMF report correctly identifies that the market has decisively shifted toward fiat-backed stablecoins—those backed 1:1 by liquid financial assets—following the high-profile collapse of algorithmic models like TerraUSD (UST) in 2022. This episode marked a structural inflection point, exposing the fragility of collateral-light and reflexive architectures and reaffirming the primacy of credible reserve backing. By focusing on “on-chain” assets denominated in major reserve currencies (primarily the USD), the report highlights a paradox: stablecoins, born from a desire for decentralization, are increasingly reliant on the stability of traditional centralized finance. In effect, the stability of “stable” digital money is now inseparable from the stability of sovereign monetary systems themselves.
The Fragmented Regulatory Landscape
Perhaps the most significant takeaway from the 2025 IMF report is the fragmentation of international regulation. While standard-setting bodies like the Financial Stability Board (FSB) have issued “High-level Recommendations,” the actual implementation across jurisdictions varies wildly. The EU’s Markets in Crypto-Assets Regulation (MiCA) is a comprehensive, specialized regime distinguishing between “e-money tokens” and “asset-referenced tokens” while the United States’ GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) adopts a narrower, payments-focused approach centred on “payment stablecoins” backed by high-quality liquid assets such as Treasury bills (T-bills). Japan restricts issuance to banks and licensed trust companies, while the UK proposes a “multi-money” system under which systemic stablecoins may eventually access central-bank liquidity.
Table 1: Comparison of EU MiCA and US GENIUS Act (2025)
| Feature | EU Markets in Crypto-Assets (MiCA) | US GENIUS Act |
| Primary Scope | Broad crypto-asset framework distinguishing e-money tokens and asset-referenced tokens “ | Narrow focus on payment stablecoins |
| Issuer Eligibility | Banks may issue directly; non-banks require authorisation | Restricted to permitted payment stablecoin issuers “ |
| Reserve Asset Requirements | High-quality liquid assets with deposit thresholds for significant issuers; specifically mandates at least 30% be held as demand deposits (60% for significant issuers) | 100% backing in cash, deposits, reserves, T-bills |
| Redemption Rights | Guaranteed redemption at par without fees (subject to recovery measures) | Timely redemption under disclosed policies |
| Foreign Issuers | EU legal establishment and licensing required | Permitted if home regime is comparable |
| Interest Payments | Prohibited | Prohibited |
| Systemic Oversight | Enhanced prudential requirements for “significant issuers “ | Proportionate oversight, no formal systemic label |
Key Regulatory Divergences and the Trade-off Between Efficiency and Integrity
Building on the contrasting regulatory philosophies embodied in the EU’s MiCA framework and the US GENIUS Act, the IMF identifies several material divergences with direct implications for financial stability and supervisory effectiveness. A first point of differentiation concerns legal classification. MiCA explicitly excludes stablecoins from the legal definitions of deposits and securities, situating them instead within a bespoke crypto-asset regulatory perimeter. By contrast, the GENIUS Act provides greater legal certainty by clarifying that “payment stablecoins” are neither securities, commodities, nor traditional bank deposits, thereby reducing ambiguity for issuers, users, and supervisors alike.
A second divergence relates to bankruptcy protection and creditor hierarchy. The GENIUS Act directly amends the US bankruptcy code to grant stablecoin holders priority claims over an issuer’s estate, strengthening consumer protection in the event of insolvency. MiCA, in contrast, relies primarily on the operational and legal segregation of reserve assets from the issuer’s balance sheet, placing greater emphasis on ex-ante safeguards rather than ex-post creditor prioritization.
Differences also emerge in operational and disclosure requirements. Under the GENIUS Act, issuers are subject to monthly executive certification of reserve holdings, examined by a public accounting firm, reflecting a high-frequency, compliance-driven supervisory approach. MiCA adopts a less frequent but more formal assurance model, requiring independent audits of one-to-one reserve backing at six-month intervals. These design choices reflect broader trade-offs between regulatory intensity, supervisory capacity, and market discipline.
Efficiency versus Integrity
Beyond formal rule differences, the IMF report underscores a deeper structural tension between payment efficiency and financial integrity. Regulatory arbitrage remains a persistent vulnerability, as stablecoin issuers can relocate across jurisdictions with relative ease, undermining global efforts to combat money laundering, terrorism financing, and illicit financial flows.
At the same time, the report acknowledges the substantial efficiency gains associated with stablecoins, particularly in cross-border payments, where transaction costs could fall from around US$30 to as low as US$5.
However, these gains are weighed against heightened integrity risks. The authors remain sceptical of claims that public blockchains deliver meaningful anonymity, noting that so-called “unhosted wallets” frequently lie beyond the reach of effective regulatory enforcement. In this context, stablecoins risk becoming channels for capital flight and illicit activity if regulatory coordination and supervisory reach fail to keep pace with technological innovation.
Macro-Financial Risks for EMDEs and Africa
For Emerging Market and Developing Economies (EMDEs) – and African economies in particular, the macro-financial risks associated with stablecoin adoption are amplified by structural vulnerabilities. Widespread use of foreign-currency-denominated stablecoins may accelerate de facto dollarization, weaken monetary policy transmission, and erode the domestic deposit base.
In Africa’s predominantly bank-centric financial systems, stablecoin-driven disintermediation could raise funding costs for banks, constrain credit to small and medium-sized enterprises, and heighten systemic risk. These pressures are especially acute in economies with shallow capital markets, limited lender-of-last-resort capacity, and high exposure to external financial shocks.
From a financial stability perspective, stablecoin runs triggered by global events – such as banking stress in advanced economies—could transmit volatility rapidly across borders, exposing EMDEs to imported financial instability without corresponding regulatory control.
Policy Box: CBDCs versus Stablecoins
Central Bank Digital Currencies (CBDCs) and stablecoins represent fundamentally different approaches to digital money. CBDCs constitute a direct claim on the central bank, preserving the singleness of money while reinforcing monetary sovereignty and systemic stability.
Stablecoins, by contrast, are private liabilities whose safety depends on regulation, reserve quality, governance arrangements, and supervisory enforcement. While they may enhance payment efficiency and foster innovation, they require robust oversight to ensure that they complement rather than undermine the public monetary system.
Conclusion
The 2025 IMF report underscores that while stablecoins offer a transformative path toward cheaper, near-instantaneous global payments, they simultaneously introduce complex risks that could undermine monetary sovereignty and financial stability if left unregulated. Fragmented implementation of policy frameworks creates incentives for regulatory arbitrage and heightens the risk of cross-border spillovers. Ultimately, the legitimacy of stablecoins as a form of digital money depends on sustained international cooperation to harmonise standards, close supervisory and data gaps, and preserve the “singleness of money” in an increasingly digital financial system.
The full Report is available on the link:
Daniel Makina and Rogers Dhliwayo are editors of Economic Business Insights
