BIS warns dollar stablecoins could weaken financial regulation

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Stablecoins can bypass capital controls

Highlights

Stablecoins can bypass capital controls.
Economic stress drives dollarization.
Dollarization is hard to reverse.
Regulators may need new tools.

The BIS compared data on foreign currency deposits with stablecoin inflows across more than 130 economies and found that both forms of dollarization are driven by similar macroeconomic pressures, including banking crises, sovereign debt stress, and sharp exchange-rate depreciation. Unlike conventional dollar deposits, however, stablecoin flows appear largely unaffected by capital controls or foreign exchange restrictions because they often circulate outside the traditional regulatory system, BIS reports.

Stablecoins create a new challenge for policymakers

According to the study, households and businesses in emerging markets increasingly use dollar-backed stablecoins as a store of value when confidence in local currencies weakens. The research suggests that once either deposit dollarization or stablecoin adoption becomes widespread, reversing the trend is difficult.

The BIS found little evidence that stablecoins are replacing foreign currency bank deposits. Instead, both instruments appear to expand access to the U.S. dollar simultaneously, reinforcing overall dollarization rather than substituting for one another.

Researchers also found that countries with moderate levels of deposit dollarization historically experienced somewhat higher inflation risks. At the same time, the report found limited evidence that either traditional or stablecoin dollarization has significantly weakened monetary policy transmission.

Regulation may struggle to keep pace

One of the report's main findings is that stablecoin transactions remain relatively resilient even where governments impose restrictions on capital flows. Because many transactions occur on blockchain networks outside domestic banking systems, authorities may have fewer tools to monitor or limit cross-border dollar transfers.

The BIS argues that this creates new challenges for regulators seeking to preserve monetary sovereignty while maintaining financial stability. As stablecoins become more widely used, policymakers may need to update regulatory frameworks that were designed primarily for traditional banking channels.

Stablecoins move into the financial mainstream

The BIS findings come as governments increasingly develop legal frameworks for stablecoins instead of treating them solely as crypto assets. By the end of 2025, the global stablecoin market exceeded $300 billion, with the overwhelming majority of tokens pegged to the U.S. dollar.

Several jurisdictions have accelerated adoption and regulation over the past year. The United States is advancing the GENIUS Act, which would establish a federal framework for payment stablecoins, while the European Union continues implementing its MiCA regulatory framework. Meanwhile, jurisdictions including Singapore, the United Arab Emirates, and Hong Kong have expanded regulated stablecoin initiatives to support cross-border payments and tokenized financial markets, reflecting a broader shift toward integrating digital dollars into mainstream financial systems.

As we previously reported, stablecoin transaction volume nears $1.8 trillion in one month.

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