The Bank for International Settlements (BIS) found that dollar-pegged stablecoins slip past the capital controls emerging-market governments rely on, handing households and firms a route into the dollar that regulators cannot easily close.
In the working paper, published on Tuesday, BIS economists Boris Hofmann, Aaron Mehrotra and Jan Paulick compared “stablecoin dollarization” with conventional deposit dollarization across more than 130 economies and found the two forms share several of the same triggers while diverging on the question that mataters most for policymakers, whether authorities can contain them.
Deposit dollarization and stablecoin inflows both climb when exchange rate pass-through runs high and when sovereign or banking crises hit, pushing savers toward the dollar. Stablecoin supply has nearly tripled since 2023 on the back of the two largest dollar coins, USDT and USDC, which together hold more than 80% of the market and underline the sector’s entrenched dollar dominance.
Stablecoins Slip the FX Net
The paper puts hard numbers on how weakly the traditional toolkit binds. Economies that held foreign-currency deposit restrictions in place across 2000 to 2016 saw deposit dollarization run 29% points lower than those with none, a gap that widens to 32 points across emerging-market and developing economies, while restrictions aimed at stablecoins carry no statistically significant relationship with inflows. According to the authors:Banking crises sharpen that divergence, lifting stablecoin inflows while leaving deposit dollarization unmoved, as savers turn to a dollar store of value outside a shaky banking system. A one-standard-deviation rise in banking-crisis frequency tracks roughly 0.8% of GDP in additional stablecoin inflows, against an emerging-market average near 1.7% of GDP over 2017 to 2024. The split comes down to reach, since capital controls bind on regulated banks while stablecoins move across permissionless blockchains and sit in unhosted wallets beyond supervisory view, with no intermediary positioned to block the transfer.“FX restrictions and capital controls are less effective for stablecoins, as the size of stablecoin inflows remains similar across regulatory regimes, unlike the foreign currency deposit share.”
Investor Takeaway
The tools work on the old channel and not the new one. A 29-point effect on deposit dollarization against no measurable effect on stablecoin inflows is the paper’s central finding.
Dollarization That Sticks
In Latin America, the median share of bank deposits held in dollars has roughly halved over two decades, sliding from around 40% to about 20%, a de-dollarization the paper notes stablecoins could now counteract. Both channels entrench themselves once established and resist reversal, with autoregressive estimates putting the persistence of deposit dollarization near 0.8 and event studies showing it holds even after economies leave high-inflation regimes. The authors find little substitution between the two, so stablecoin demand largely adds to dollar exposure rather than pulling it out of bank deposits. Deposit dollarization carries a measured cost for monetary control, with moderate dollarization coinciding with somewhat higher inflation risk while the most dollarized economies import the anchor currency’s credibility and face lower risk. The authors see little evidence that it weakens monetary transmission on its own, tempering sharper warnings about threats to monetary sovereignty. Capital controls anchor many emerging-market stability frameworks, and their weakness against stablecoins leaves those frameworks exposed as adoption spreads, a shift that has already pushed authorities such as India’s central bank to reject private dollar tokens outright. The authors close with caution, noting that stablecoins may not scale as some expect and that the deposit-dollarization record may not map cleanly onto a market sitting largely outside regulated finance.Investor Takeaway
Persistence estimates near 0.8 mean this does not unwind when conditions improve, which turns an adoption trend into a durable constraint on policy.
