The adoption of cryptocurrency in emerging markets poses risks to financial sovereignty and financial resilience, credit rating giant Moody's Rating said in a report Thursday.
Reports show that risk is the most severe in areas where crypto uses go beyond investment in savings and remittances. Moody's suggests that higher penetration of stubcoins fixed in the US dollar will weaken financial communications as it leads to more and more settlements outside the pricing and market domestic currency.
Stablecoins are crypto tokens that are fixed at the value of traditional financial assets such as Fiat currency, with the US dollar being the most common.
“This creates 'cryptography' pressures similar to informal dollarization, but with more severe opacity and less visibility into the regulations,” Moody's said.
Cryptocurrency also offers new ways of capital flight, via pseudonymous wallets and offshore exchanges, allowing individuals to carefully move wealth abroad and undermine exchange rate stability.
Moody's also highlights the rise in cryptocurrency ownership is concentrated in emerging markets, particularly in parts of Southeast Asia, Africa and Latin America. Here, adoption is often subject to inflationary pressures, currency pressures, and access to banking services is restricted. In contrast, recruitment, which is the adoption of a more advanced economy, is driven by institutional integration and clarity of regulation.
Crypto ownership increased to an estimated 562 million people by 2024, a 33% increase from 2023, the report said.
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