Can the World Bank & IMF Keep Up With Stablecoins?
The Annual Meeting of the World Bank Group and the International Monetary Fund (IMF) began this week (Oct 13-18), and the question on everyone's mind is how these global financial entities will navigate the surge of stablecoins.
Stablecoin transactions have skyrocketed since the Spring Meetings, thanks to the influx of new market participants brought about by the US GENIUS Act, which established regulations and required stablecoins to be backed by low-risk assets on a 1:1 basis, often referred to as a peg.
This IMF/World Bank session couldn't have come at a more important time.
Stablecoin Growth by the Numbers
In the third September quarter, the generation of net stablecoins — defined as new tokens minus redemptions — jumped to $45.6 billion, an astounding 324% rise from $10.8 billion in the second quarter.
The overall market valuation has reached around $300 billion as a result of this expansion. While modest in the context of global payments, these figures signal rapid change on the horizon.
Many anticipate a major disruption to the global payment systems, which will have far-reaching effects on economies around the world.
There has been a meteoric rise in the amount of stablecoin transactions in recent years, with monthly volumes now exceeding $1 trillion.
So, it is essential for the IMF and the World Bank to prioritize assisting member nations in harnessing the advantages of stablecoins while effectively mitigating their risks.
These world bodies have consistently championed global financial stability and economic growth.
The IMF has been notably proactive in providing ad hoc advice to governments, along with policy recommendations and regulatory requirements concerning cryptocurrencies.
Nonetheless, stablecoins exhibit certain shortcomings.
The World Bank, along with other multilateral development banks (MDBs), appears to be taking a more limited role.
IMF's Regulatory Push
The IMF, in a white paper, highlighted the key points and topics up for discussion at the annual meeting. It emphasized that smart regulation can help create a secure environment while fostering innovation. The IMF points out that digital currencies have existed for over ten years, yet regulatory efforts have only recently gained policy momentum.
This shift can be attributed to the recent evolution of crypto assets from niche offerings seeking relevance to a more prominent role in the market as speculative opportunities, safeguards against currency instability, and possible methods of payment.
The remarkable, albeit unpredictable, expansion in the market value of digital assets and their gradual integration into the regulated financial landscape have prompted heightened initiatives for oversight and regulation.
The growth of various crypto products and offerings has been remarkable, along with the innovative developments that have enabled issuance and transactions.
The setbacks experienced by cryptocurrency issuers, exchanges, and hedge funds have intensified the call for regulatory measures. Applying existing regulatory frameworks — or building new ones — poses complex challenges.
Regulatory bodies are facing challenges in attracting skilled professionals and developing the necessary expertise to stay competitive, especially with limited resources and numerous other commitments demanding attention.
Keeping an eye on crypto markets presents challenges due to inconsistent data, and it proves complex for regulators to oversee the multitude of participants who might not adhere to standard disclosure or reporting obligations.
Some of the other challenges that the IMF highlighted showed that many regulatory authorities are still playing catch-up, with contrasting national approaches.
In the white paper, the IMF defined what stablecoins are, why they are becoming so popular, and the pace of stablecoin growth. There are growing signs that stablecoins are moving toward mainstream adoption.
The success or failure of stablecoin integration into current payment systems and the regulatory environments of major economies will determine the final result.
The IMF paper also highlighted the challenges, calling them myriad downside risks to a significant increase in the use of stablecoins. They include:
- Significant differences in the risk profile of stablecoins
- The need for a trusted centralized entity to hold and manage reserves
- Increased competition for deposits, leading to increased dollarization and undermining monetary sovereignty
- The potential loss of seigniorage
- Significant integrity risks.
What Can Global Regulators Do?
Implementing strong regulatory frameworks can help reduce some of those risks. A major obstacle is the uneven and often contradictory attitude taken by regulators in reaction to the rapid growth of stablecoin use.
Although the United Kingdom and Canada are still hesitating, many major markets have already enacted stablecoin rules, including the European Union, the United States, Hong Kong, and the United Arab Emirates.
This fragmented approach invites regulatory arbitrage — where firms exploit looser rules in certain jurisdictions.
Despite the many risks, the benefits of stablecoins are driving huge demand, which is rapidly expanding the stablecoin ecosystem.
Stablecoin acceptance is aided greatly by the international financial institutions (IFIs), most notably the IMF, which promotes financial stability on a worldwide scale.
When it comes to ensuring that the benefits of stablecoins are distributed fairly and fostering sectoral stability, the multilateral development banks are indispensable.
Stablecoins should be part of World Bank President Ajay Banga's digital transformation plan, which he sees as crucial for expanding access to financial services and improving economic prospects.
In order to exert their influence on this issue, IFIs can engage at the national level, hold meetings, provide advice documents, use monitoring instruments, and publish important publications, among other things.
Missed Opportunities and Next Steps
In 2023, the IMF published a policy paper that provides recommendations for appropriate governmental reactions to cryptocurrency assets.
Furthermore, the functions and duties of key players, such as the IMF, the Financial Stability Board (FSB), the Financial Action Task Force (FATF), and important organizations that establish standards, are detailed in a synthesis document that was prepared in conjunction with the FSB.
As the first-ever publication by the IMF to explore stablecoins, the status report on the roadmap's implementation in October last year is a watershed moment.
Given the possibility of runs on the issuer or the underlying reserve assets and the vulnerability of these assets to sudden drops in confidence, it suggests that they should follow specific regulatory guidelines.
The roadmap includes an agreement from the IMF to incorporate policies related to crypto-assets into Article IV assessments, which are the annual and bi-annual economic reports for countries, as well as into Financial Sector Assessment Programs (FSAPs), when appropriate.
The vague “when suitable” clause underscores the need for clearer integration into country programs.
It was unexpected to discover that the most recent FSAP for India, released in February 2025, made no mention of cryptocurrency or stablecoins at all — especially given that India is one of the top countries in terms of crypto acceptance worldwide.
Separately, given the government's attempts to position South Africa as a leader in the cryptocurrency industry, the omission of reference to the country's crypto framework in the January 2024 Article IV review was surprising.
It is critical that the IMF and its board work together to create transparent criteria outlining particular principles for interacting with member nations about stablecoins, in light of the existing coverage inequalities.
Beyond the nebulous "when suitable" comes the need for integration into concrete policy programs.
It is imperative that the World Bank improve its efficiency. Major international organizations' roles in putting crypto-asset policy frameworks into action are detailed in a September 2023 study.
Incorporating suggestions for these frameworks through capacity building and technical assistance is a joint endeavor between the World Bank and the IMF.
Stablecoins are expected to experience substantial growth because of their many advantages — including reliability as a store of value, and faster, cheaper, and more efficient transactions than traditional payment systems.
The current trend toward stablecoin adoption without proper regulatory frameworks threatens to destabilize markets and exacerbate existing inequalities around the world.
When dealing with the influx of stablecoins, the world's financial institutions must act decisively — and urgently.
The timing of this week's annual meeting could just be right.
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