The International Monetary Fund (IMF) has issued a warning that stablecoins, particularly those pegged to the US dollar, could undermine monetary sovereignty in emerging markets and developing economies. In its report "Understanding Stablecoins," the IMF highlights the rapid penetration of these digital currencies, which can weaken central banks' control over domestic liquidity and interest rates. The report suggests that stablecoins' ease of access via mobile phones and the internet makes them susceptible to "currency substitution," potentially diminishing the use of local currencies and affecting monetary policy transmission. To mitigate these risks, the IMF recommends that countries establish legal frameworks to prevent stablecoins from being recognized as "legal tender" or "official currency." The report notes that 97% of stablecoins are currently pegged to the US dollar, with minimal representation from the euro or Japanese yen. Additionally, the use of stablecoins is rising in cross-border payments and in regions with high inflation, such as Africa, the Middle East, and Latin America.