Stablecoins, tokens, and global markets

The international monetary system is on the brink of disruption, and technology is holding the lever. Writing in the IMF’s latest F&D Finance & Development Magazine, Hélène Rey, Lord Bagri Professor of Economics at LBS, argues that stablecoins and tokenisation could redraw the financial map, amplifying both opportunity and risk in equal measure.

Stablecoins, crypto instruments pegged to fiat money, mostly the US dollar, are already bridging the old world of banks and the new world of blockchain. They promise cheap, fast cross-border payments, especially where domestic systems are weak or costly. Yet if adoption surges, expect the fallout: dollarisation, erosion of fiscal revenues, hollowed-out banking systems, and a further concentration of financial power in Washington and in a handful of private issuers. Tether and USDC, for example, now hold more US Treasuries than Saudi Arabia, a telling sign of how quickly the tectonic plates are shifting.

Tokenisation is the other force in play. By moving assets and claims onto programmable platforms, it could integrate messaging, reconciliation and transfer in one sweep, potentially unifying global capital flows and democratising access to securities. But it also risks recreating the 19th-century world of competing private monies, with the same instability and lobbying muscle that undermined monetary order in the past.

Rey stresses that regulation, international coordination and technological resilience will shape the outcomes. Without them, stablecoins may become vehicles for sanctions evasion, money laundering and systemic runs. With them, tokenisation could reduce costs and open up access to assets worldwide – though it would also sharpen competition between currencies. The US dollar starts with a commanding lead, but programmable capital controls and sovereign digital currencies could still tilt the balance toward a multipolar system.

One underappreciated fault line is data integrity. As quantum computing threatens today’s cryptography, currency networks most vulnerable to hacking could face crises of confidence. In such a world, Rey argues, “integrity privilege”, the premium investors attach to networks least exposed to cyber risk, may rival the fabled “exorbitant privilege” of the dollar.

The bottom line? Technology is accelerating a global monetary experiment. Whether it delivers efficiency gains or financial fragmentation will depend not just on innovation but on who writes the rules, governments, regulators, or private actors with deep pockets and louder lobbying.