Emerging Markets Crypto Adoption Endangers Monetary Policy
Moody’s warns that crypto adoption in emerging markets is undermining monetary policy and financial resilience. Rising use of dollar-pegged stablecoins for savings and remittances weakens domestic monetary transmission. Adoption now extends beyond investment into savings, remittances and payments. This escalates cryptoization pressures akin to unofficial dollarization but with less oversight. Anonymous wallets and offshore exchanges facilitate capital flight and erode exchange rate stability. Crypto adoption is concentrated in Southeast Asia, Africa and Latin America, driven by high inflation, currency depreciation and limited banking access. Global crypto users reached 562 million in 2024, up 33% year-on-year. Policymakers must balance financial innovation with safeguarding monetary sovereignty and market stability, unlike developed economies that favor institutional integration and clearer regulation.
Bearish
This warning from Moody’s highlights rising regulatory and stability risks associated with increased crypto adoption in emerging markets. In the short term, traders may react negatively to the prospect of central bank interventions, restrictions on stablecoins and potential capital controls. Over the long term, persistent monetary pressures and heightened macroprudential measures could dampen market confidence and volatility, making this news bearish for crypto assets.