BIS Warns 98% of Stablecoins Are Dollar-Denominated, Risking Faster ‘Digital Dollarization’ in Emerging Markets

Dollar-backed stablecoins give households and companies in emerging markets a way to hold and transfer U.S. dollar exposure outside conventional banking channels. The Bank for International Settlements says the resulting “digital dollarization” could reduce demand for local currencies, weaken monetary sovereignty and complicate efforts by central banks to preserve financial stability.

The BIS’s latest research found that flows involving U.S. dollar stablecoins are largely insensitive to capital controls, allowing assets to move beyond established banking and foreign-exchange safeguards. The study did not disclose a single aggregate dollar amount or a specific implementation date, but warned that traditional market rules may struggle to contain these digital flows and the pressure they place on emerging-market policy frameworks.

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 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.