BIS Warns Dollar Stablecoins May Weaken Emerging-Market Capital Controls

In economies where official access to foreign exchange is restricted, dollar stablecoins such as USDT have become important tools for hedging and transactions. While these decentralized assets can bypass traditional foreign-exchange controls, they also pose challenges to national monetary sovereignty. The International Monetary Fund has studied the dual impact of stablecoins on emerging markets with fixed exchange-rate regimes. Its findings are expected to serve as an important reference for governments developing future cryptocurrency regulations.

In Working Paper No. WP/26/144, published in July 2026, the IMF said dollar stablecoins can improve access to foreign exchange but may amplify the risk of runs out of local currencies during crises. Citing Bolivia, the paper noted that USDT trading volumes rose significantly after the country lifted its ban on virtual assets in June 2024. USDT’s price even became an important gauge of the parallel-market dollar exchange rate, prompting authorities to adopt dynamic regulatory measures, including temporary trading restrictions.

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.

Dollar stablecoins are generally pegged 1:1 to the U.S. dollar and can be accessed with only a digital wallet. They offer fast, lower-cost cross-border transfers and a store of value. In emerging markets with high inflation, fragile financial systems or capital controls, their use for transactions, pricing and wage payments could accelerate dollarization and currency substitution, weakening local central banks’ monetary policy effectiveness and monetary sovereignty.

In a report issued after its June 18, 2026 board meeting, Taiwan’s central bank said the global stablecoin market had grown from less than $10 billion six years earlier to more than $300 billion, while their use in cross-border payments continued to rise. The central bank warned that dollar stablecoins lower the barriers to holding U.S. dollars. However, Taiwan’s efficient payment system and public confidence in the New Taiwan dollar mean there are currently no clear signs of currency substitution.

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.

Stablecoins are crypto assets pegged to fiat currencies such as the U.S. dollar. They promise faster, cheaper cross-border payments while making dollars more accessible in regions with high inflation or capital controls. The Bank for International Settlements (BIS) said about 98% of stablecoins are denominated in dollars, warning that wider adoption could weaken monetary sovereignty and regulatory effectiveness in emerging markets.

Speaking at a Bank of Japan seminar in Tokyo on April 20, 2026, BIS General Manager Pablo Hernández de Cos warned that stablecoins could circumvent capital and foreign-exchange controls, facilitate tax evasion and fuel dollarization. Their global market capitalization stood at about $315 billion in early April. On-chain transaction volume reached $35 trillion in 2025, but only about $390 billion was used for payments, while stablecoins were estimated to account for most illicit transactions in the crypto ecosystem.