BIS warns stablecoins could weaken capital controls in emerging markets
BIS research finds dollar-backed stablecoins are driving a new “digital dollarization,” especially in emerging markets, and their use appears largely unaffected by capital controls. Across 130+ economies, both foreign-currency deposits and stablecoin inflows rise during macro stress, but stablecoin flows show little response to FX restrictions, likely because they operate partly outside the regulated banking system. This may weaken monetary sovereignty by enabling households and businesses to hold dollars outside banks, particularly where local currencies are weak or financial access is limited. The study found little evidence that deposit dollarization broadly disrupts monetary policy transmission, though higher foreign-currency deposits are linked to somewhat higher inflation risk. BIS says new policy tools may be needed as tokenized finance expands.
