The Bank for International Settlements has published research showing that stablecoin flows can bypass capital controls, accelerating a trend it calls stablecoin dollarization. The July 2026 working paper finds that 99.4% of fiat-backed stablecoins are pegged to the US dollar, making the phenomenon almost entirely USD-centric. With a market cap of roughly $320 billion as of May 2026 and transaction volumes in the tens of trillions, stablecoins are increasingly used for savings, payments, and cross-border transfers — potentially weakening central bank control over local economies.
How stablecoins bypass restrictions
The BIS Working Paper No. 1370 examined stablecoin inflows and found they are largely unaffected by broad or targeted capital flow restrictions. That means people and businesses in countries with strict currency controls can move money in and out using dollar-pegged tokens, sidestepping the rules central banks rely on to manage exchange rates and inflation. The paper notes that stablecoins offer faster and cheaper cross-border transfers compared to traditional banking, especially in emerging markets where those advantages are most needed.
Countries most exposed
Not every economy faces the same risk. The BIS research identifies countries with volatile inflation, foreign-exchange backlogs, or shallow local capital markets as the most exposed to stablecoin dollarization. In those places, residents may turn to stablecoins as a store of value or a payment method, effectively replacing the local currency. That shift can weaken monetary policy transmission — if people aren't using the local currency, central bank interest rate changes have less impact.
Risks for stablecoin users
The paper doesn't paint stablecoins as risk-free. Users face custody risks if the issuer fails, legal risks if regulators crack down, and depeg risks if the token loses its dollar peg. The BIS notes that these risks are real, especially in jurisdictions with weak consumer protections. Still, the convenience and speed of stablecoin transfers continue to draw users, particularly in markets where traditional banking is slow or expensive.
Policy options and limits
The BIS suggests policy responses such as oversight of on-ramps and off-ramps — the points where users convert fiat currency to stablecoins and back — along with greater transparency from issuers. But the paper is clear: there are no quick fixes. Regulators can't simply ban stablecoins without pushing activity underground. The challenge is to manage the risks without cutting off the benefits that users clearly value.
The research comes as stablecoin market cap has grown to around $320 billion, with no sign of slowing. The BIS working paper offers no simple solutions, but it points to the need for careful monitoring of stablecoin on-ramps and off-ramps as the market continues to expand.
