Taiwan Central Bank Warns Dollar Stablecoins Are Accelerating Currency Substitution 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.

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.