IMF Warns of Increased Capital Flight from Dollar Stablecoins During Crises

An IMF working paper warns that dollar stablecoins could increase access to foreign currency under fixed exchange rate regimes but may exacerbate capital flight if exchange rate volatility rises. The paper analyzes how stablecoins could serve as an alternative to formal currency channels in restricted dollar access scenarios, while noting their potential to amplify currency runs during crises. Economic scholar Brendan Joel Tan explains that stablecoins create visible price signals reflecting dollar demand, which could trigger mass capital outflows if market and official exchange rates diverge significantly. The paper suggests regulators may need temporary restrictions on abnormal transactions or panic-driven trading during severe exchange rate stress.