Cryptocurrency adoption in rising markets poses dangers to financial sovereignty and monetary resilience, credit score scores big Moody’s Rankings mentioned in a report on Thursday.
The dangers are most acute in areas the place crypto’s use extends past funding into financial savings and remittances, in keeping with the report. Moody’s means that greater penetration of stablecoins pegged to the U.S. greenback weaken financial transmission when it results in pricing and settlement more and more occurring exterior a market’s home foreign money.
Stablecoins are crypto tokens pegged to the worth of a conventional monetary asset, comparable to a fiat foreign money, with the U.S. greenback comfortably probably the most prevalent.
“This creates ‘cryptoization’ pressures analogous to unofficial dollarization, however withgreater opacity and fewer regulatory visibility,” Moody’s mentioned.
Cryptocurrency can even present new methods of for capital flight, via pseudonymous wallets and offshore alternate, permitting people to maneuver wealth overseas discreetly, undermining alternate fee stability, in keeping with the report.
Moody’s additionally highlighted how elevated possession of cryptocurrency has been concentrated in rising markets, significantly in Southeast Asia, Africa and components of Latin America. Right here, adoption is usually pushed by inflationary strain, foreign money pressured and restricted entry to banking providers. In distinction, adoption in additional superior economies, adoption is pushed by institutional integration and regulatory readability.
Crypto possession expanded to an estimated 562 million folks by 2024, a rise of 33% from 2023, the report mentioned.
Learn Extra: Stablecoin Adoption Set to Surge After GENIUS Act, Hit $4T in Cross-Border Quantity: EY Survey