BIS says dollar-backed stablecoins can bypass capital controls in 130-plus economies

Research from the Bank for International Settlements says dollar-backed stablecoins are creating a new channel of digital dollarization that is harder for governments to restrain than traditional foreign-currency bank deposits. Using deposit data from more than 130 economies and stablecoin inflow data for 184 countries from 2017 to 2024, the study found bank crises are associated with stablecoin inflows that are 0.8% of GDP higher, while capital controls reduce deposit dollarization by 25 to 32 percentage points but have a much weaker effect on crypto flows. The BIS said stablecoins operate largely outside the regulatory perimeter used to enforce foreign-exchange restrictions, raising risks to monetary sovereignty in emerging markets and developing economies. The paper was co-authored by three economists including Boris Hofmann, with a final version dated June 30 and publication noted on July 21. Stablecoin supply stood at $292.6 billion on July 21, up from $253 billion a year earlier, even as the U.S., the European Union and Japan advanced oversight frameworks.