Gita Gopinath, Vice President of the International Monetary Fund (IMF), said that the rise of stablecoins can create new difficulties especially for central banks of developing countries. In an interview with Financial Times, Gopinath pointed out that US President Donald Trump’s wavy customs policies and stablecoins become increasingly complicated than the global monetary policy management even more complex than the COVID-19 pandema.
Fast growth in stablecoins
The rapid growth observed in the digital existence ecosystem caused the stablecoin market to come to the fore. With Circle’s USD Coin’s public offering on the New York Stock Exchange, the Stablecoin public supply reached approximately 250 billion dollars. The total value of the transactions in the last 30 days is measured around 2 trillion dollars and this amount has increased by 44 times since June 2020.
Approximately 35 million active addresses correspond to the active user in Stablecoin mobility. In addition, it is considered that the government is preparing to put the first comprehensive legislation on crypto assets into force in August period.
In the light of these developments, the potential effects of the spread of digital assets on developing markets continue to be a matter of discussion.
Are the worries exaggerated?
Detailed data on the use of stablecoin reveal a different table for the concerns of the IMF official. According to the data compiled by Artemis, India, Brazil, Thailand, United Arab Emirates and Indonesia are at the top of stablecoin streams with a share of only 5.9 %. This rate indicates that other developing markets do not show significant intensity in the use of stablecoin.
According to Elizabeth Rossiello, CEO of African -based Aza Finance, turning to beings other than local currency for risk protection is not a new phenomenon in these countries. “In many wavy markets, accumulations were already kept in traditional assets such as gold or foreign currency. Investments in digital assets replace the old alternatives, but there is no significant increase in capital output”.
Elizabeth Rossiello: “In many wavy markets, the savings were already kept in traditional assets such as gold or foreign currency. Investments in digital assets replace the old alternatives, but there is no significant increase in capital output.”
However, there are examples of the increase in the use of stablecoin in countries such as Nigeria. Chris Maurice, CEO of Yellow Card, stated that stablecoin and crypto technologies have become widespread in Nigeria, and emphasized that daily use in physical products is still low.
Chris Maurice: “Nigeria is one of the biggest markets for these technologies and is growing rapidly. But it is not common to pay with Stablecoin in a cafe.”
Is it an opportunity for local banks?
The view that Stablecoins offers an alternative to international payment networks rather than threatening the local financial system stands out. Maurice argued that this new technology has strengthened local currencies and facilitates local banks to access global networks.
Chris Maurice said: “This technology enables people and businesses to interact better with the US dollar. The main threat is aimed at rooted global financial institutions.”
According to Maurice, especially in Africa, local banks can adopt digital dollars and reduce their dependencies on old banking networks. The IMF did not share more information on Gopinath’s statements.
Despite different expert views on Stablecoins, precise data that these technologies radically changed local financial ecosystems in developing countries cannot be reached.
Although the use of stablecoin in developing countries is generally a rapid growing market, it points out that existing data effects may vary according to markets. Experts say that stablecoins offer alternatives to traditional financial systems and that local financial institutions can help them gain flexibility in international transactions. However, there are some warnings that central banks’ control of monetary policy may be reduced. While readers monitor the spread and potential effects of stablecoins in developing markets, they should take into account that regulations may play a decisive role in the future of the sector.
Responsibility Rejection: The information contained in this article does not contain investment advice. Investors should be aware that crypto currencies carry high volatility and thus risk and carry out their operations in line with their own research.
