The stablecoin warnings are getting louder. Senior central bank officials are already raising alarms about the rapid spread of US dollar stablecoins, crypto assets whose value is pegged to the dollar, into emerging market economies, arguing they threaten monetary stability, enable capital flight and create new pathways for financial crime.
The concern isn’t theoretical anymore. It came up repeatedly when top financial policymakers gathered in Washington last week for the International Monetary Fund and World Bank spring meetings, and it got fresh emphasis on Monday in a speech delivered in Japan by the head of the Bank for International Settlements.
Pablo Hernández de Cos, general manager of the BIS, the Switzerland-based institution that acts as a forum for the world’s central banks and helps manage their foreign exchange reserves, said stablecoins “raise serious risks for financial integrity and can facilitate regulatory circumvention.”
He warned that their rising use could “make it easier to evade capital controls” in developing countries and intensify what economists call dollarisation, the process by which a foreign currency, typically the US dollar, begins to displace a country’s own money in everyday transactions.
He also pointed to illicit finance, citing estimates that stablecoins “now account for most illicit transactions within the crypto ecosystem,” and said their growing popularity “opens up new avenues for tax evasion.”
A market that has grown too big to ignore
The stablecoin market is no longer a niche corner of crypto. About 98 percent of the $315 billion global stablecoin market is denominated in US dollars, and usage has accelerated sharply following President Donald Trump’s vocal embrace of digital assets.
Congress passed the Genius Act last year to bring stablecoins into a regulated framework, a move that lent the sector a degree of legitimacy it previously lacked.
That political tailwind has made the international regulatory conversation more complicated. Andrew Bailey, governor of the Bank of England and chair of the Financial Stability Board, the global body that coordinates financial regulation, told an industry event in Washington that progress on building international rules for stablecoins had stalled.
“If you had asked me a year ago, I would have said we are heading very quickly towards it,” he said. “But I think it is something that we will have to come to terms with pretty soon.”
The FSB’s slowdown on stablecoin rules matters because gaps in global standards are exactly what make regulatory arbitrage, playing different countries’ rules against each other, possible.
What’s actually happening in emerging markets
In countries dealing with high inflation, currency depreciation or tight restrictions on moving money abroad, dollar stablecoins have become a practical workaround for ordinary people. They offer a way to hold savings in a currency that doesn’t lose value as quickly as the local one, and to move money internationally outside the formal banking system.
Tobias Adrian, who heads the monetary and capital markets department at the IMF, told the Financial Times that in some emerging economies, dollar stablecoins already account for “a significant share of payments, including cross-border payments.”
He acknowledged that stablecoins can lower costs and speed up cross-border transfers which are genuine advantages, but said the bigger structural concern was harder to dismiss. “The major challenge is dollarisation. For the central bank, it may be a threat to monetary sovereignty.”
Analysts at Standard Chartered have estimated that savings held in dollar stablecoins by people in emerging markets could climb from $173 billion late last year to $1.22 trillion by end of 2028.
That would still represent only around 2 percent of bank deposits in those countries, but the trajectory is steep, and concentrated in nations with recent balance of payments crises or active IMF stabilisation programmes, such as Pakistan, Bangladesh, and Egypt.
Reza Baqir, former governor of Pakistan’s central bank and now an adviser at Alvarez & Marsal, put it plainly: “I would be extremely nervous about anything that affected capital controls.”
Some countries aren’t waiting for international consensus. Brazil recently updated its legislation to require stablecoin providers to conduct anti-money laundering checks, the same obligations banks carry, and has capped many foreign stablecoin transfers at $100,000. It’s one of the more concrete policy responses so far.
Not everyone sees the picture as uniformly bleak. Dan Katz, deputy head of the IMF and former chief of staff at the US Treasury, said stablecoins were boosting competition and cutting costs in payments, and suggested countries could protect themselves by strengthening their own macroeconomic frameworks.
That’s a reasonable point in theory, but “improve your macroeconomics” is a tall order for governments already under IMF programs.
The BIS, for its part, is working with central banks and commercial lenders on an alternative: tokenised deposits, which would digitise money already held within the regulated banking system and allow it to move more seamlessly across borders.
The idea is to offer some of the speed and efficiency of stablecoins without handing control of the payment rail to private issuers operating largely outside any single country’s jurisdiction.