Senior central bankers warn that the surge in US dollar-denominated stablecoins threatens to deepen dollarization in emerging economies, eroding monetary sovereignty and enabling capital flight. At the Bank for International Settlements (BIS), Pablo Hernández de Cos highlighted risks including regulatory evasion and tax avoidance, noting stablecoins now dominate illicit crypto transactions. The $315bn global stablecoin market—98% dollar-pegged—fuels concerns as countries like Egypt and Pakistan, recovering from balance-of-payments crises, see rising adoption. Brazil’s $100,000 transfer limits on stablecoins reflect efforts to curb unregulated flows, while the IMF’s Dan Katz urged stronger macroeconomic frameworks to counter dollarization.

Critics argue stablecoins, marketed as cost-effective payment tools, instead destabilize local currencies and empower informal dollar savings, with $1.22tn projected in EM stablecoin holdings by 2028. Meanwhile, the BIS explores tokenized deposits as a regulated alternative, and the Financial Action Task Force flags stablecoins’ role in laundering ransomware proceeds. Central banks stress the urgency of global regulatory coordination to mitigate these risks.