The collapse and de-peg of certain stablecoins since the outbreak of the crypto-asset market turmoil in 2022 highlights the potential fragility of stablecoins that are not adequately designed and regulated. Stablecoins also present concerns related to financial integrity, illicit finance, data privacy, cyber-security, consumer and investor protections, market integrity, fiscal stability, and macroeconomic stability. While these risks and challenges are global, some emerging market and developing economies (EMDEs) may be exposed to additional risks and challenges associated with global stablecoin (GSC) activities.

There are several factors that can amplify regulatory implementation challenges for EMDEs, including capacity and resource constraints, the prevalence of foreign currency pegged stablecoins, and extensive cross-border operations of foreign currency pegged stablecoins.

This report explores potential factors driving the higher level of activities related to foreign currency-pegged stablecoins in EMDEs, their associated financial stability risks and regulatory challenges, and provides considerations to address them.