IMF's Bo Li Sounds Alarm on Global Stablecoin Race: Two Burning Issues Unresolved

Hold onto your digital wallets, crypto fans! Bo Li, the Deputy Managing Director at the IMF, just dropped a bombshell at the World Economic Forum's Summer Davos meeting. He's pointing out two massive unresolved issues in the global tug-of-war for stablecoin dominance, and it all boils down to how we classify these digital beasts.

Bo Li didn't hold back at Summer Davos 2025. He's watching the world go wild over stablecoins, with regions like the US, Europe, and Asia charging ahead with their regulatory experiments. "We're seeing a flood of digital currency and stablecoin trials popping up everywhere," he declared, his voice echoing through the halls of global finance.

Countries are scrambling to build the perfect legal and regulatory playground for stablecoins. Financial giants and tech wizards are all in, ready to roll out services to catch the wave of adoption that's coming.

But here's the kicker: Bo Li's not convinced we've got it all figured out yet. There's still this massive gray area about whether stablecoins should be treated like money or parked in the financial asset lot with gold, stocks, and the gang. And get this – the rules for stablecoins would flip like a pancake depending on which box we shove them into.

"We're just scratching the surface," Li warned. "There's a mountain of problems still to climb, and the world needs to huddle up and get on the same page."

If stablecoins get the currency stamp, they'd be in the same league as their pegged assets. But then comes the big question: are we talking M0 – the cash in your pocket – or M2, the broader money supply that includes your savings and investments? This choice could make or break the game, affecting everything from anti-money laundering to how much cash these digital coins need to keep in reserve.

Why is the IMF Sweating Over Stablecoin Classification?

M0 is like the lifeblood of the economy – it's the cash you hold, the coins jingling in your pocket, and the reserves banks stash away. It's the bedrock for many stablecoins today, keeping them pegged 1:1 to the dollar or other currencies.

But M2? That's a whole different ballgame. It's M0 plus all the money you've got sitting in demand deposits, savings accounts, and other liquid assets that aren't exactly ready to spend. It's the full monty of money in the economy, used for everything from buying groceries to investing in the next big thing.

If we treat stablecoins like M0, they'd be digital cash twins, and that means tight regulation on how they're created, redeemed, and kept liquid. Central banks might even start wondering if stablecoins are gunning for their spot in issuing currency, like those CBDCs we've been hearing about.

But if stablecoins get the M2 label, they'd be more like the money you've got in the bank or a money market fund. They'd have to play by the rules set for financial middlemen.

The US just threw down the gauntlet with the Genius Act, aiming to clear up the fog around USD-backed stablecoins. Meanwhile, Hong Kong's not far behind with their own Stablecoin Ordinance, set to kick in on August 1. The IMF's watching this global showdown closely.

And it's not just the big players. Russia, South Korea, and even China are feeling the heat from both Wall Street and Main Street to step up their stablecoin game. No one wants to be left in the dust as the world races toward a new digital financial frontier.