The International Monetary Fund warns that the widespread adoption of stablecoins could weaken central bank control.

According to Odaily Planet Daily, the International Monetary Fund (IMF) stated that stablecoins have the potential to broaden individuals' access to financial services, but this may come at the expense of central banks.

In a 56-page report released Thursday, the international organization noted that “currency substitution” is a potential risk posed by stablecoins, and stated that this trend could gradually erode national financial sovereignty.

Historically, individuals wishing to hold US dollars typically needed to possess physical cash or open a specific type of bank account. However, the IMF emphasizes that "stablecoins can rapidly penetrate a country's economic system via the internet and smartphones."

The organization added, "Especially in cross-border scenarios, stablecoins denominated in foreign currencies could lead to currency substitution, which could potentially undermine monetary sovereignty, especially in the presence of uncustodial wallets."

The IMF stated that if a large amount of economic activity no longer relies on the domestic currency, central banks will find it difficult to effectively control domestic liquidity and interest rate levels.

The report points out that if foreign-denominated stablecoins gain a foothold in payment services, domestic alternatives such as central bank digital currencies (CBDCs) may face competitive pressure. Unlike privately issued stablecoins, CBDCs are digital forms of sovereign currency issued, regulated, and managed by central banks.