Stablecoins could end up concentrating financial power and reinforcing the dominance of the US dollar, rather than delivering the decentralized financial system originally promised by crypto technology, according to a new article published by the International Monetary Fund.
In a Point of View essay for the IMF’s Finance & Development, economist Eswar Prasad argues that stablecoins have solved some technical problems in digital payments but at the cost of reintroducing centralized control and governance. The article, titled The Stablecoin Paradox, was published in December 2025 .
Prasad recalls that early crypto innovators aimed to remove central banks and large commercial lenders from financial intermediation. Bitcoin and blockchain technology were meant to democratize access to payments, savings, and credit. That ambition faltered when volatile crypto assets proved unsuitable for everyday transactions and instead became speculative investments.
Stablecoins emerged to fill this gap by offering price stability through backing with fiat currencies or government bonds. While they use blockchain infrastructure, Prasad stresses that they rely on trust in issuing institutions rather than decentralized, algorithmic governance. Issuers control access, validate transactions, and set the rules, making stablecoins, in his view, the opposite of truly decentralized finance.
Payments Gains, Broader Risks
The article acknowledges that stablecoins have delivered real benefits in payments, especially cross-border transfers. They have reduced costs for remittances, sped up international trade settlements, and highlighted inefficiencies in existing payment systems. Beyond payments, however, Prasad argues that decentralized finance has largely produced complex financial products that mainly fuel speculation and expose unsophisticated investors to new risks.
Prasad also warns that recent regulatory shifts in the United States could accelerate concentration. Allowing large corporations and banks to issue stablecoins may crowd out smaller players and further entrench the power of major technology firms and financial institutions.
At the global level, the dominance of dollar-backed stablecoins risks strengthening the current international monetary system rather than challenging it. Prasad notes that demand for euro- or yen-backed stablecoins remains limited, reinforcing the US dollar’s central role in global payments. This dynamic has contributed to concerns at the European Central Bank and added momentum to plans for a digital euro.
Prasad concludes that stablecoins expose the need for better payment infrastructure and coordinated regulation. Without effective international oversight, he warns, they may lead to greater concentration of power and financial instability rather than the open, competitive system crypto’s pioneers envisioned.