BIS warns that stablecoins may undermine the effectiveness of capital controls in emerging markets

According to Cointelegraph, researchers from the Bank for International Settlements (BIS) have found that dollar stablecoins are forming a new type of "digital dollarization," which is almost insensitive to capital controls in emerging markets, making it more difficult for governments to regulate such assets compared to traditional foreign currency deposits.

The researchers analyzed foreign currency deposit and dollar stablecoin inflow data from over 130 economies and found that both increased during periods of macroeconomic stress. However, the flow of stablecoins showed little response to capital controls or foreign exchange restrictions, possibly because they are "partially outside the regulatory scope." The BIS pointed out that stablecoins could undermine monetary sovereignty, and policymakers need new tools to address financial stability risks.