Global Central Bank Officials Warn: U.S. Push for Stablecoins Accelerates "Dollarization" and Impacts Emerging Markets

The U.S. initiative to continuously promote the development of the stablecoin industry has aroused widespread vigilance and collective voices from central bank officials around the world. A number of top international financial policymakers have clearly warned that therapid expansion of U.S. dollar-denominated stablecoins will further exacerbate the "dollarization" risks of emerging market economies, weaken their monetary sovereignty and capital control capabilities, and at the same time provide opportunities for illegal financial activities such as money laundering and tax evasion.

Pablo Hernández de Cos, President of the Bank for International Settlements (BIS), stated in a public speech in Japan on Monday that stablecoins "pose serious risks to financial integrity and may facilitate regulatory arbitrage," and emphasized that the rapid popularization of such digital assets will make it more difficult for emerging and developing countries to maintain effective capital controls.

Andrew Bailey, Governor of the Bank of England, also stated in Washington that the degree of penetration of stablecoins into the field of national currency substitution deserves high attention from the international community, and he clearly pointed out that the progress of the international community in formulating unified regulatory rules for stablecoins has slowed down significantly.

Against the backdrop of intensive warnings from senior central bank officials around the world, the current global stablecoin market size has climbed to 315 billion US dollars, of which about 98% are U.S. dollar-denominated stablecoins. It is reported that the active support for digital assets by the U.S. Trump administration, as well as the passage of the "Genius Act" by the U.S. Congress last year, are providing solid institutional support for the further expansion of the U.S. dollar stablecoin market.

Emerging Markets Face Threats to Monetary Sovereignty

The potential impact of stablecoins on emerging markets has become a core topic of focus among many senior officials during the annual meetings of the International Monetary Fund (IMF) and the World Bank in Washington last week.

Tobias Adrian, Director of the IMF's Monetary and Capital Markets Department, stated in an interview with the Financial Times that in some emerging market countries, U.S. dollar stablecoins have accounted for "a significant share of payments, including cross-border payments." He acknowledged that stablecoins have advantages such as speed and low cost in cross-border payments, but emphasized at the same time: "The biggest challenge is dollarization. For central banks, this could be a direct threat to monetary sovereignty."

Pablo Hernández de Cos further added that the widespread popularization of stablecoins will continue to exacerbate the "dollarization risks" in emerging markets and open up new channels for various behaviors that evade capital controls. He also cited relevant estimates pointing out that stablecoins currently account for the majority of illegal transactions within the crypto ecosystem, and the continuous expansion of their scope of use "has also opened up new avenues for tax evasion."

Reza Baqir, former Governor of the Central Bank of Pakistan and now employed by consulting firm Alvarez & Marsal, stated bluntly: "Anything that may affect the effectiveness of capital controls worries me extremely."

Stablecoins Accelerate Penetration in Emerging Markets

The expansion momentum of U.S. dollar stablecoins in emerging markets cannot be ignored. With the depreciation of local currencies and high inflation in some emerging markets, more and more local residents have begun to use U.S. dollar stablecoins as an important tool to hedge against local currency risks, avoid high inflation pressures, and bypass international payment restrictions.

Estimates from Standard Chartered Bank analysts show that the scale of U.S. dollar stablecoin savings held by residents in emerging markets may grow from 173 billion US dollars at the end of last year to 1.22 trillion US dollars by the end of 2028—although this scale will still only be equivalent to about 2% of the total bank deposits in these countries at that time.

Standard Chartered Bank also predicts that the regions with the strongest growth in U.S. dollar stablecoin holdings will be concentrated in countries that have recently experienced balance of payments crises or are under IMF stabilization programs, including Egypt, Pakistan and Bangladesh.

Slow Progress in Formulating Regulatory Rules

Faced with the rapid expansion of stablecoins, global regulatory coordination has fallen into a state of lag. Andrew Bailey, Chairman of the Financial Stability Board and Governor of the Bank of England, admitted that the progress of the international community in formulating unified regulatory rules for stablecoins has slowed down significantly. "If you had asked me a year ago, I would have said we were moving fast. But I think this is an issue we will soon have to face and resolve."

At the same time, the Financial Action Task Force (FATF), the global authority on anti-money laundering, clearly warned in a report released in March this year that stablecoins "are highly attractive to criminals" and that virtual currencies are increasingly becoming "the preferred method for laundering proceeds from ransomware, phishing and other cybercrimes."

Currently, the regulatory responses to stablecoins vary across countries. Among them, Brazil has revised relevant legislation, incorporated stablecoin providers into the scope of bank anti-money laundering compliance supervision, and set a ceiling of 100,000 US dollars for many cross-border transfers.

Dan Katz, former U.S. Treasury Chief of Staff at the IMF and current Deputy Director of the IMF, holds a relatively optimistic stance. He believes that stablecoins help increase market competition in the payment field and reduce payment costs, and stated that countries can effectively resist the rise of dollarization pressure by "improving macroeconomic frameworks."

As an important forum for central banks around the world, the Bank for International Settlements (BIS) has long maintained a prudent attitude towards stablecoins. Last year, the BIS clearly pointed out that such new types of digital cash "perform poorly" in meeting the key criteria for becoming real money and are difficult to assume the role of a pillar of the monetary system.

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