Dollar-backed stablecoins are becoming a growing challenge for monetary authorities in emerging markets, according to new research from the Bank for International Settlements (BIS), which argues that tokenized dollars are increasingly operating beyond the reach of traditional capital controls.
Stablecoins Create a New Form of Digital Dollarization
In a study covering more than 130 economies, BIS researchers found that both foreign-currency bank deposits and dollar-pegged stablecoins tend to attract inflows during periods of macroeconomic stress. The key difference, however, is that stablecoin adoption appears largely unaffected by foreign exchange restrictions or capital controls that have historically limited access to foreign currencies.
According to the report, stablecoins circulate partially outside the traditional regulatory perimeter, allowing households and businesses to move into dollar-denominated digital assets without relying on domestic banking systems. This creates what researchers describe as a new form of “digital dollarization”, one that may gradually weaken governments’ ability to manage capital flows and preserve confidence in local currencies.
Emerging Markets Face the Greatest Policy Challenge
The findings are particularly significant for emerging economies, where persistent inflation, currency depreciation, and limited access to foreign exchange have accelerated demand for digital dollars. In many of these markets, stablecoins are increasingly serving as an alternative savings vehicle and payment rail rather than simply a crypto trading instrument.
Recent International Monetary Fund (IMF) research on Nigeria reached similar conclusions, showing that households and small businesses are adopting dollar-backed stablecoins for remittances, cross-border commerce, and access to dollar-denominated assets. While these tokens improve payment efficiency and financial inclusion, they may also reduce demand for domestic currencies and shift financial activity outside regulated banking systems.
Stablecoin Adoption Continues to Accelerate
The BIS warning comes as the stablecoin market continues its rapid expansion. According to DefiLlama, total stablecoin market capitalization has climbed to approximately $309.7 billion, compared with roughly $260 billion a year earlier.
Adoption is also accelerating across Latin America. Bitso Business recently reported an 81% year-over-year increase in stablecoin payment volume during the first half of 2026. The company also noted that Circle’s USDC and Tether’s USDT accounted for approximately 40% of all cryptocurrency purchases across the region in 2025, surpassing Bitcoin as the preferred digital asset for transactions.
These figures illustrate how stablecoins are increasingly evolving into practical financial infrastructure for payments, savings, and international commerce rather than remaining solely within the cryptocurrency trading ecosystem.
Monetary Sovereignty Versus Financial Innovation
From a policy perspective, the BIS findings highlight a growing dilemma. Stablecoins deliver tangible economic benefits by lowering remittance costs, improving payment speed, and expanding access to dollar liquidity in underserved markets. At the same time, widespread adoption may reduce the effectiveness of monetary policy by encouraging households and businesses to bypass domestic financial institutions.
Interestingly, the researchers found limited evidence that foreign-currency deposits significantly weaken monetary policy transmission. However, economies with higher levels of deposit dollarization showed a somewhat greater tendency toward elevated inflation, suggesting that financial stability risks may emerge gradually rather than immediately.
Outlook: Regulators May Need New Policy Tools
The BIS argues that regulatory frameworks built for conventional banking systems may prove insufficient as tokenized dollars become increasingly embedded in global finance. Traditional capital controls and foreign exchange restrictions were designed around regulated financial intermediaries, whereas blockchain-based stablecoins can circulate across decentralized networks with far fewer barriers.
As adoption continues to expand, policymakers may need to develop new supervisory frameworks that preserve financial stability without undermining the efficiency gains offered by digital assets. The debate is likely to become increasingly important as stablecoins transition from niche crypto instruments into globally accepted payment and settlement infrastructure.
Comparison, examination, and analysis between investment houses
Leave your details, and an expert from our team will get back to you as soon as possible
