BIS exposes how stablecoins are slipping past capital controls
BIS researchers have found that dollar-backed stablecoin inflows across more than 130 economies remain largely unaffected by capital controls, exposing a growing challenge for emerging-market governments. The BIS study compared stablecoin inflows with foreign-currency bank deposits to examine how households and businesses gain exposure to the U.S. dollar during periods of financial stress. Both forms of dollarization increased alongside sovereign crises, banking problems and strong exchange-rate pass-through, but only traditional deposits responded clearly to restrictions on foreign currency and capital flows. Unlike bank deposits, dollar-pegged tokens can move through crypto exchanges, peer-to-peer markets and self-hosted wallets without passing through domestic banks. According to the researchers, this difference likely exists because “stablecoins are partly circulating outside the regulatory perimeter.” The results indicate that restrictions designed for bank accounts may have limited influence over digital tokens. While governments can require approval for foreign-currency deposits or restrict transfers through financial institutions, users can still receive, hold, and send stablecoins through blockchain networks. Researchers also found that deposit and stablecoin dollarization tend to persist once established. Their analysis showed little evidence that users simply replace foreign-currency deposits with stablecoins, suggesting the two channels can expand at the same time instead of competing for the same demand. Capital controls are