Capital controls may be weakened in effectiveness, BIS warns stablecoins pose a "digital dollarization" risk to emerging markets

Odaily Planet Daily News: Researchers at 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 manage such assets compared to traditional foreign currency deposits. The researchers analyzed data on foreign currency deposits and dollar stablecoin inflows from over 130 economies, discovering that while both increase during periods of macroeconomic stress, stablecoin flows show almost no reaction to capital controls or foreign exchange restrictions, potentially because they "operate partially outside the scope of regulation." The BIS pointed out that stablecoins may weaken monetary sovereignty, and policymakers need to use new tools to address financial stability risks.