BIS Warns U.S. Stablecoins Threaten Financial Integrity and Emerging Markets

Stablecoins use dollar-denominated assets as reserves to keep USDT and USDC at $1, but eligibility, fees and processing times limit redemptions. The Bank for International Settlements (BIS) says their structure is more akin to that of ETFs. A wave of redemptions could force issuers to sell U.S. Treasuries or withdraw bank deposits, potentially transmitting stress to the traditional financial system.

In its Annual Economic Report published on June 24, 2025, the BIS said the global stablecoin market was worth about $250 billion, with Tether and Circle accounting for roughly 85% combined. It warned that stablecoins could lose their $1 peg in secondary markets and that transactions on public blockchains contained money-laundering loopholes. The report also said dollar stablecoins could exacerbate foreign-exchange risks in emerging markets and called for coordinated international regulation.

Stablecoins maintain their value through backing by fiat currencies or low-risk assets and have been viewed as tools for payments, trading and cross-border stores of value in crypto markets. The Bank for International Settlements (BIS) said a shift by residents of emerging markets and developing economies into dollar stablecoins could weaken demand for domestic currencies, the transmission of central bank interest-rate policy and the management of capital flows, raising concerns over monetary sovereignty.

On May 5, 2026, the BIS published Report No. 170, “Stablecoins and Their Implications for the International Monetary and Financial System.” The report said more than 300 stablecoins are active worldwide, with a combined market capitalization exceeding $300 billion, and about 98% are denominated in U.S. dollars. It outlined three scenarios—niche adoption, digital dollarization and the integration of domestic stablecoins—and warned that rapid currency substitution would pose an urgent risk to emerging markets.