Stablecoins Slip Past Capital Controls Bank Deposits Cannot, BIS Finds

BIS finds stablecoins slip past capital controls

The Bank for International Settlements (BIS) published a working paper on 21 July 2026 examining how dollar-pegged stablecoins spread through emerging markets. Researchers Boris Hofmann, Aaron Mehrotra and Jan Paulick drew on foreign-currency deposit data and stablecoin inflows across more than 130 economies. They found stablecoin flows show little response to capital controls or foreign exchange restrictions, unlike traditional bank deposits. Stablecoins are digital tokens built to hold a fixed value, and their main use so far has been as a store of value in developing economies.

Both forms of dollarisation rise during crises

The study links both channels to the same pressures. Sovereign debt crises, banking instability and strong exchange-rate pass-through all push households and businesses toward the dollar. The risk is sharpest in emerging markets with weak currencies or limited access to reliable financial services. Stablecoins now offer a second route into dollar liquidity alongside foreign-currency bank deposits. The authors found little evidence that users swap one for the other, which suggests both channels can expand at the same time.

"Stablecoins are partly circulating outside the regulatory perimeter", 21 July 2026. — Boris Hofmann, Aaron Mehrotra and Jan Paulick, BIS Working Paper No 1370

Dollarisation persists once it takes hold

The paper documents strong persistence in both deposit and stablecoin dollarisation. Once residents shift into dollars, that behaviour is hard to reverse even after conditions improve. The BIS warns this could make it harder for emerging-market governments to rebuild confidence in local currencies. Capital controls have historically curbed deposit dollarisation because banks enforce domestic rules. Stablecoins instead move through exchanges, peer-to-peer markets and self-hosted wallets. Because that activity sits partly outside the banking system, authorities can also lose sight of capital movements they would normally track.

Dollar stablecoins command a large market

Tether (USDT) held a market capitalisation of about $184.1 billion, and USDC about $73.2 billion, at the time of publication (CoinPaprika, 22 July 2026). Both tokens kept their dollar pegs, trading near $1.00. That scale shows why the BIS treats stablecoins as part of broader dollarisation rather than a niche crypto tool.

Moderate dollarisation raises inflation risk

Historical data shows moderate deposit dollarisation has been associated with somewhat higher inflation risk. The researchers found little evidence that it weakens the transmission of monetary policy through interest rates. The larger concern, they argue, is a gradual erosion of government control over the domestic money supply and cross-border capital flows. Stablecoins may sharpen that concern because their use can extend beyond savings into payments, trade settlement and remittances.

BIS says policymakers need new regulatory tools

The BIS concludes that rules built for banks and foreign-currency deposits may prove less effective in a tokenised financial system. Policymakers may need tools designed for blockchain-based assets to manage financial stability as stablecoin use grows. Any response would have to account for exchanges, peer-to-peer transfers and self-hosted wallets that keep activity outside domestic banks. According to the International Monetary Fund (IMF), stablecoins have cut the cost and time of cross-border payments, yet wider adoption of dollar-backed tokens could reduce demand for local currencies and weaken monetary sovereignty.

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