An IMF working paper finds dollar-linked tokens can improve access to foreign currency in normal times but may sharpen coordinated exits when a fixed exchange rate becomes badly misaligned.
An IMF working paper by Brandon Joel Tan argues that dollar stablecoins can both improve welfare and increase crisis risk in economies defending an overvalued fixed exchange rate. The paper says stablecoins help households access foreign currency and improve price discovery in normal conditions, but can deepen currency runs once a peg becomes badly misaligned. By turning fragmented parallel-market quotes into a single, constantly updated reference price, a token such as Tether (USDT) can help users coordinate rapid exits at the same time. Tan’s simulations show average crisis exposure rising from 3.9% in a cash-only economy to 7.4% in a full stablecoin economy, and from 4.8% to 12.9% at the most severe misalignment. The paper points to a state-dependent policy approach that preserves low-cost access in calm periods while using temporary, targeted frictions on large or run-like flows during acute stress.