IMF warning! Fragmented stablecoin regulations are creating "regulatory hurdles"

On December 5, the International Monetary Fund (IMF) released a special report titled “Understanding Stablecoins,” which clearly pointed out that the global inconsistency in stablecoin regulation is causing market inefficiency and threatening financial stability.

The report warns that if stablecoin issuers move to regions with lax regulations or build closed ecosystems with poor interoperability, the risks to the global financial system will be amplified. As of September 2025, the total global stablecoin market capitalization has soared to about $300 billion, nearly doubling within a year, and has become a key tool for cross-border payments.

01 IMF’s Warning: Systemic Concerns Behind the Boom

The IMF’s latest report reveals a contradictory phenomenon: while stablecoins are rapidly expanding in areas such as cross-border payments, the global regulatory framework is showing dangerous signs of fragmentation.

The IMF states that differences in regulatory progress among countries have led to “fragmentation.” For example, the European Union (EU) has implemented comprehensive crypto asset market regulation laws (MiCA) with strict issuance requirements.

Meanwhile, the United States, through the GENIUS Act, aims to strengthen the dominance of the US dollar stablecoin. Japan also operates an independent regulatory framework.

The IMF is deeply concerned about this, believing that such lack of coordination may not only cause market inefficiency but could ultimately undermine financial stability. The core message of the report is that simply introducing regulations cannot address all risks.

Countries need to cooperate internationally to establish sound macroeconomic policies and robust institutions to defend monetary sovereignty and prevent regulatory fragmentation.

02 The Evolving Role of Stablecoins: From Transaction Medium to Financial Power

Stablecoins have far surpassed their initial positioning as a trading medium within the crypto market. IMF data shows that as of last year, cross-border funds flowing through stablecoins reached about $1.5 trillion, far exceeding the amounts transferred via Bitcoin or Ethereum.

The report notes that stablecoins are expanding as a cross-border payment method, serving as a bridge between volatile crypto assets and fiat currencies.

A noteworthy and concerning phenomenon is that in emerging markets such as Africa, the Middle East, and Latin America, “currency substitution” is accelerating. Local residents use stablecoins to hedge against the risk of local currency devaluation.

While this “dollarization” trend provides low-cost remittance services for financially vulnerable groups, it could also weaken the effectiveness of domestic monetary policy and lead to capital outflows.

03 Fragmented Regulatory Landscape and Global Impact

The global “every country for itself” regulatory approach is becoming the greatest source of uncertainty.

The IMF report points out that regulatory divergence is currently one of the most urgent challenges. Different jurisdictions have varying regulatory speeds and focuses, which can easily lead to regulatory arbitrage and market distortion.

If stablecoin issuers move their bases to regions with loose regulations or establish closed ecosystems with poor interoperability, the overall risk to the global financial system will rise.

This fragmentation is not only a matter of individual countries’ financial security but also concerns the stability of the international monetary system. The IMF warns that regulatory differences may “cause market inefficiency and undermine financial stability.”

04 Structural Flaws in the Stablecoin Market

Despite their large scale, stablecoins have inherent structural flaws, which the Bank for International Settlements (BIS) and central banks around the world have long warned about.

The BIS stated in its annual economic report that stablecoins perform poorly in the three key tests of money: singleness, elasticity, and integrity.

For example, in terms of “singleness,” different stablecoins (such as USDT, USDC) can have secondary market prices that deviate from their pegged value due to differences in issuers, reserve asset quality, and credit. This undermines the fundamental attribute of money as a unified measure of value.

In terms of “elasticity,” stablecoins typically use a 100% reserve issuance model, making their supply inflexible compared to the traditional banking system, which can expand and contract according to economic needs. This limits their ability to respond to liquidity crises.

Regarding “integrity” (i.e., compliance capabilities such as anti-money laundering and counter-terrorism financing), stablecoins, as digital bearer instruments, can freely circulate cross-border to various wallets and have inherent vulnerabilities in “Know Your Customer” (KYC) compliance, making them prone to illicit use.

05 Current Market Situation and Dominance of Major Players

The stablecoin market is highly concentrated and deeply intertwined with traditional finance. According to DefiLlama data, as of December 2, the total market capitalization of stablecoins has exceeded $306.775 billion.

Of this, Tether’s USDT occupies more than 60% of the market share, with a market cap of about $184.572 billion. Circle’s USDC ranks second with a market cap of about $76.982 billion.

The IMF report reveals a key impact: stablecoin issuers have become important buyers of U.S. short-term Treasury bonds, holding about 2% of the total U.S. Treasury issuance—comparable to some major national central banks or sovereign wealth funds.

This trend has been further solidified by the GENIUS Act, which took effect in the U.S. last year. The act requires stablecoin issuers used for payments to hold reserves only in cash or safe assets such as short-term Treasury bonds.

06 The IMF’s Historical Framework and Gate’s Response

Faced with an increasingly complex regulatory environment, cryptocurrency industry participants are proactively adjusting strategies in pursuit of compliant development. The IMF had already, in March 2025, included crypto assets for the first time in the seventh edition of the Balance of Payments Manual, laying the groundwork for classification-based regulation.

Under this framework, unbacked assets such as Bitcoin are classified as non-productive, non-financial assets, while liability-backed digital currencies such as stablecoins are clearly defined as financial instruments. This classification provides important guidance for global regulators.

As a leading global trading platform, Gate Exchange is also actively adapting to this trend. Its strategic adjustments clearly reflect an approach of seeking innovation within a compliance framework.

For example, Gate recently lifted trading restrictions on mainstream cryptocurrencies like Bitcoin and Ethereum to support broader crypto ecosystem development, while strengthening the vetting of some emerging tokens to protect user interests.

More importantly, to address potential regulatory freeze risks faced by existing stablecoins like USDC and to expand permissionless business areas, Gate has announced plans to launch its native stablecoin, USDH.

According to the plan, USDH will be tailored to on-chain demand and activated through a transparent community voting process, strictly adhering to relevant regulatory requirements.

07 Industry Consensus and Prospects for Cooperation

Major global financial institutions have reached a preliminary consensus on the core principles of stablecoin regulation. The Financial Stability Board (FSB) proposed the “same activity, same risk, same regulation” principle in July 2023, which has become an important basis for international regulatory coordination.

The IMF report ultimately calls for addressing the challenges posed by stablecoins not through the efforts of any single country, but through robust international cooperation. Countries must work together to establish a global regulatory framework that can both guard against risks and not stifle innovation.

For exchanges like Gate, this means that while embracing innovation, compliance, transparency, and full reserves must be the cornerstones of development.

Measures such as launching native stablecoins and optimizing token listing review processes are not only responses to market demand but also proactive attempts to integrate into the global regulatory framework of the future.

Future Outlook

The amount of U.S. short-term Treasury bonds held by stablecoin issuers now accounts for about 2% of total U.S. Treasury issuance, a level of influence comparable to the central banks of major countries. Meanwhile, more than 90% of the stablecoin market is dominated by USDT and USDC, both pegged to the U.S. dollar.

In the field of cross-border payments, the scale of funds flowing through stablecoins has reached about $1.5 trillion—a figure far exceeding the cross-border flows of Bitcoin and Ethereum—clearly outlining a new financial network, parallel to the traditional SWIFT system, that is rapidly taking shape.