$305 Billion Crypto Timebomb? IMF Flags Stablecoins as New Threat to Global Finance

The International Monetary Fund is turning up the volume on a warning that could shake parts of global finance. In its latest Financial Stability Report, the IMF said the $305 billion stablecoin marketonce seen as crypto's safe cornercould become a source of systemic risk. These tokens, usually backed by liquid assets such as U.S. Treasuries, have ballooned in scale and influence. But if confidence ever cracks, the IMF cautioned, forced liquidations of reserve assets could ripple through bank deposits, government bonds, and repo markets, possibly compelling central banks to step in to stabilize conditions.

The timing is critical. Banks are no longer watching from the sidelines. Goldman Sachs Group Inc. GS, Deutsche Bank AG (NYSE:DOD), and Banco Santander SAN are teaming up to explore a fully reserve-backed digital currency on public blockchains. Citigroup Inc. C is joining nine European lenders developing a euro-denominated stablecoin. These moves follow the U.S. Genius Act, which sets a clearer regulatory framework for digital tokens. The total value of stablecoins has already climbed past $300 billion this year, according to data from DeFiLlamaa sign that institutional players see the space as too big to ignore.

Regulators are uneasy about what comes next. The IMF warned that widespread use of stablecoins could limit central banks' ability to steer inflation or control liquidity, as digital tokens tied to the dollar might compete with national currencies. A recent wobble underscored the fragility: Ethena, the world's third-largest stablecoin, briefly lost its dollar peg during a volatile weekend in crypto markets. The Financial Stability Board has pledged tighter oversight, echoing similar alerts from the Bank for International Settlements, the European Central Bank, and the International Organization of Securities Commissionsall signaling that stablecoins are edging closer to the heart of the global financial system.