A new working paper from the International Monetary Fund (IMF) raises a stark warning: dollar-backed stablecoins such as Tether (USDT) could serve as a coordination device for mass currency runs in countries with fixed exchange rates. The paper, authored by researcher Brandon Joel Tan, examines the dual role of stablecoins in parallel foreign exchange markets — they enhance price transparency but simultaneously amplify systemic risk.
The Unified Signal in Parallel Markets: Transparent or Dangerous?
When governments set official exchange rates above market value, access to foreign currency becomes restricted, pushing buyers and sellers into parallel markets involving street dealers, brokers, or banks. Multiple prices emerge, obscuring the true scarcity of dollars. Tan argues that stablecoins traded on crypto exchanges against local currencies create a constantly updated, unified price signal for the dollar's value, sometimes overshadowing fragmented black-market quotes.
On one hand, this transparency helps households manage risk and hedge against currency misalignment. On the other, a single, easily accessible reference price can prompt large numbers of people to react simultaneously to unfavorable shifts, accelerating capital flight.
Bolivia Case Study: Central Bank Embraces USDT Rate
The research highlights Bolivia as a recent example. In June 2024, the central bank lifted restrictions on virtual-asset transactions. From July 2024 to May 2025, the volume of such transactions within the Bolivian financial system surged twelvefold. During this period, the USDT/Boliviano exchange rate became the primary reference for the parallel dollar price, to the extent that the central bank began publishing the USDT rate on its official website.
Simulation Data: Crisis Exposure Nearly Doubles
Tan simulated three economic models: a cash-only economy, one with stablecoin access but no public pricing, and a third with both stablecoin access and a highly visible public price. The results show crisis exposure rising with transparency. Average crisis exposure jumps from 3.9% in a cash-only setting to 7.4% when stablecoins and public pricing are both present. At maximum exchange-rate misalignment, the difference is even starker: from 4.8% to 12.9%.
The welfare impact follows a state-dependent pattern. During stable conditions, welfare gains can reach up to 1.2%. However, when misalignment worsens past a threshold of approximately 0.59, gains vanish and can fall as low as -6.3% in extreme scenarios.
Policy Advice: No Blanket Bans, but State-Contingent Controls
Tan cautions against broad restrictions on stablecoins, warning that such measures could harm unbanked households. He emphasizes that robust macroeconomic policy remains the foundation. The paper advocates a state-contingent approach: preserve low-cost access during normal conditions, but allow authorities to impose temporary, targeted controls on large or run-like flows during periods of acute misalignment.
While the working paper represents the author's views, not the IMF's official stance, its findings are likely to shape ongoing regulatory discussions on designing safe frameworks for stablecoin use in vulnerable economies.