Cape town: As new technologies continue to reshape the financial system, stablecoins are drawing increased attention for their potential benefits and risks, particularly in emerging markets. Speaking at the University of Cape Town, a leading expert highlighted the challenges and opportunities posed by the growing trend toward the tokenization of financial assets, with a focus on stablecoins. According to International Monetary Fund, stablecoins, despite their modest size relative to the financial system, have seen significant growth and now hold a market capitalization of around $300 billion. The majority of these coins are denominated in U.S. dollars. The global transaction volume for stablecoins surpassed $30 trillion in 2025, with $6.1 trillion being cross-border transactions. This growth points towards the potential of stablecoins to increase competition in payments and financial services, while also posing risks to emerging markets. In emerging markets, stablecoins offer more frictionless access to for eign currency, notably U.S. dollars, which can have significant macroeconomic implications. The IMF's new work indicates that the impact of foreign exchange stablecoins on emerging markets varies based on macroeconomic frameworks, currency substitution prevalence, financial market structures, and the availability of local-currency stablecoins. The growth of stablecoins could potentially lead to easier access to foreign currency for users, allowing remittance beneficiaries to directly receive foreign assets in their digital wallets. This shift could lead to a broader adoption of FX holdings for local transactions, posing a risk of dollarization in emerging markets. The development of local-currency stablecoins is one strategy countries might employ to manage these pressures. However, lower demand for local-currency stablecoins suggests that users might prefer dollar-linked instruments due to their liquidity and broad acceptance. This could diminish the control traditional financial intermediaries have over c apital flows, as on-chain transactions become more prevalent. Stablecoins might exacerbate dollarization dynamics, especially in regions with episodes of financial dollarization driven by high inflation and exchange rate volatility. These dynamics could unfold rapidly due to the ease of access provided by digital platforms, potentially leading to volatile capital flows and financial instability. In highly dollarized economies, stablecoins may serve as a digital alternative to existing dollar assets, with limited macroeconomic impact. However, in economies with constrained access to foreign currency, stablecoins could create additional pressure for dollarization, challenging existing regulatory frameworks designed for traditional financial institutions. To address these challenges, policymakers in emerging markets are advised to strengthen macroeconomic fundamentals, close data gaps, revise policy toolkits, tailor policy responses to adoption channels, and enhance international cooperation. The IMF is activ ely supporting member countries in adapting regulatory frameworks and improving cross-border payments infrastructure. The future role of stablecoins in the international financial system remains uncertain. Nevertheless, they hold the potential to benefit households and businesses through reduced costs and increased competition, provided policymakers implement the right frameworks to balance innovation with macroeconomic and financial stability.