Central Banks Sound Alarm Over Dollar Stablecoins Threatening Emerging Markets

Global Financial Stability at Risk

Central bankers, including IMF Deputy Managing Director Gita Gopinath, are warning that US dollar-pegged stablecoins pose a threat to monetary sovereignty in emerging markets . The majority of stablecoins, which currently hold over 90% of the market by value, are tied to the US dollar, according to the Bank for International Settlements (BIS) . The fast-rising use of stablecoins could also "make it easier to evade capital controls" in emerging markets and developing countries trying to keep control on financial flows and heighten "dollarisation risks," said BIS general manager Pablo Hernández de Cos .

Of the roughly $290 billion of current global stablecoin supply, it is estimated that ~66% is held by individuals in emerging markets . The most popular stablecoins, USDT and USD Coin (USDC), are pegged to the U.S. dollar and boast a combined market cap of $264 billion. That amount is almost equal to France's FX reserves and larger than those of the UAE, the United Kingdom, Israel, Thailand, and many other nations .

Digital Dollarization Accelerates

They say these tokens make it easier for people and businesses in emerging markets to hold and move digital dollars outside local banking systems . Dollar stablecoins now offer a digital version of that escape route for residents who traditionally saved in cash dollars to escape inflation or currency volatility. Standard Chartered forecasts that as much as $1 trillion could move into dollar-pegged digital currencies over the next three years as savers in fragile economies seek deposit stability. "Stablecoins give consumers and corporates in emerging markets new access to what is effectively a USD-based bank account," said Geoffrey Kendrick, head of digital assets research at Standard Chartered .

If panic grips EMs, locals can now move capital across borders seamlessly and swiftly via stablecoins, weakening capital flow management measures . Capital can rush out of a country during a crisis through stablecoin rails, even if formal capital controls are in place . The report identifies Egypt, Pakistan, Bangladesh, Sri Lanka, Turkey, India, Brazil, South Africa, and Kenya as most vulnerable .

Banking Systems Under Pressure

The IMF and BIS note that when people shift savings and payments into US‑pegged tokens, local banks lose deposits and cheap funding. That can push up funding costs, limit credit, and weaken domestic financial stability . At the same time, heavy use of foreign stablecoins can make exchange rates more volatile .

Their increasing popularity "opens up new avenues for tax evasion," he added, citing estimates that "stablecoins now account for most illicit transactions within the crypto ecosystem" . They say hostile states and non‑state groups may prefer dollar stablecoins because they are widely accepted yet harder to police than bank wires .

Trump Administration's Strategic Vision

President Trump, for example, has pointed to stablecoins as a critical mechanism by which to further propagate and lock in USD dominance globally . USD-pegged stablecoins, therefore, are deploying as a lever for the USA to assert economic dominance geopolitically and to seek out an efficient method for continuing, even deepening, global dollarization .

While stablecoins offer benefits like faster remittances and financial inclusion, their rapid growth presents a fundamental challenge to monetary sovereignty worldwide. Policymakers are now pushing for tighter global rules on stablecoin issuers and their reserves . The race between innovation and regulation will determine whether these digital dollars become tools of financial liberation or instruments of economic disruption in the world's most vulnerable economies.