Stablecoin boom risks ‘cryptoization' as fragmented rules leave economies exposed — Moody's

**Stablecoin Surge Threatens Global Financial Stability as 'Cryptoization' Accelerates**

Moody's Investors Service warns that the explosive growth of stablecoins is creating dangerous "cryptoization" effects across emerging markets, undermining traditional monetary policy frameworks and threatening bank deposit stability. The credit rating agency highlights how fragmented cryptocurrency regulations are leaving developing economies increasingly vulnerable to digital asset volatility.

The stablecoin market expansion is enabling widespread cryptocurrency adoption in regions with weak monetary systems, effectively replacing local currencies with blockchain-based alternatives. This cryptoization phenomenon bypasses central bank controls, reducing governments' ability to implement effective monetary policy and manage economic stability.

Moody's emphasizes that inconsistent regulatory oversight across jurisdictions creates systemic risks as capital flows shift toward decentralized finance (DeFi) protocols and Bitcoin alternatives. Traditional banking sectors face deposit flight as consumers migrate to cryptocurrency platforms offering higher yields and cross-border transaction capabilities.

The warning signals growing institutional concern about unregulated digital asset proliferation in financially unstable regions. As stablecoin usage accelerates globally, policymakers must address regulatory gaps before cryptoization permanently disrupts established financial systems and threatens macroeconomic stability in vulnerable emerging market economies.