BIS Study: Stablecoin Dollarization Could Weaken Monetary Control in Emerging Markets
A BIS working paper released on July 21 shows that stablecoins are opening a new channel for dollar liquidity in emerging markets. Compared with trad…
What happened
When the local currency depreciates, the banking system comes under pressure, or sovereign risk rises, households and firms often look for dollar assets. In the past, this kind of “dollarization” mainly happened through foreign-currency deposits; today, dollar stablecoins offer another entry point: users can obtain dollar-denominated onchain assets through trading platforms, custodial wallets, or even self-custody wallets.
On July 21, the Bank for International Settlements (BIS) published the working paper “Dollarisation and monetary control: what lessons for the rise of stablecoins?” The research team compared foreign-currency deposit data from more than 130 economies with recent inflows into dollar stablecoins. The paper finds that traditional deposit dollarization and stablecoin inflows are influenced by similar factors, including the strength of exchange-rate pass-through, sovereign crises and banking crises; both are highly persistent and not easy to reverse once established.
More notably, the paper shows that stablecoin flows appear to be less affected by foreign-exchange or capital-flow restrictions, whereas foreign-currency deposits are typically more constrained by these policy tools. BIS believes one possible explanation is that a significant share of stablecoins circulates outside regulatory boundaries.
Why it matters
This does not mean stablecoins have already replaced bank deposits, nor does it mean they will necessarily render monetary policy ineffective. The BIS paper explicitly notes that, historically, moderate deposit dollarization has been associated with higher inflation risks, but there is not yet enough evidence that it has materially changed monetary-policy transmission. The study is more about identifying a new channel: dollar liquidity can move across borders onchain, bypassing some traditional banking and capital-account channels.
For emerging markets, the question therefore expands from “whether to allow stablecoin payments” to “who can observe, restrict, and ultimately settle these dollar positions.” If stablecoins grow larger, central banks may face not only deposit outflows, but also dollar asset accumulation outside the local financial system, more volatile capital flows, and liquidity pressure. In its 2026 Annual Economic Report, BIS also pointed out that 99.4% of fiat-backed stablecoins are pegged to the dollar by market value, giving stablecoin expansion an inherently dollar-internationalization character.
For issuers, trading platforms, and financial infrastructure companies, regulatory focus may also move beyond reserve transparency to wallet access, cross-chain flows, redemption arrangements, and how they connect to the banking system. Whether stablecoins are more like money that can be used for payments, or instead become investment instruments that trade away from par and carry redemption restrictions, will directly determine their impact on bank funding, short-term Treasury markets, and central bank liquidity management.
What still needs watching
First, whether stablecoin inflows accelerate during periods of high inflation, exchange-rate crises, or banking stress, and form cross-border patterns that can be repeatedly identified. Second, whether capital controls can be effectively enforced through trading platforms, wallet providers, and onchain monitoring. Third, whether countries will bring stablecoins into banking and payments regulatory frameworks, or allow them to develop as relatively independent dollar channels.
The BIS research is a correlation analysis, not a precise forecast of future shocks. What will really determine market impact will still be the reserve structure of stablecoins, redemption rules, use cases, and whether regulators can establish cross-platform data and settlement interfaces. For investors, stablecoins are no longer just a trading medium in the crypto market; they may also gradually become an alternative indicator for observing dollar liquidity, the effectiveness of capital controls, and monetary sovereignty in emerging markets.
Sources
Information only. No investment, legal, tax, or financial advice.