BIS and IMF Warn That Dollar Stablecoins Are Outpacing Capital Controls in Emerging Markets
A joint study from the Bank for International Settlements and the International Monetary Fund concludes that USD-pegged stablecoins are structurally resistant to the capital flow restrictions that governments in emerging markets rely on to protect their currencies.
The BIS published Working Paper No. 1340 this week, examining stablecoin flows across more than 130 economies. The central finding is stark: foreign exchange restrictions and capital controls that historically slowed deposit-based dollarization (the process by which citizens and businesses shift from local currency to US dollars for savings, payments, and trade) have little measurable effect on stablecoin activity.
Because stablecoins can be held in self-custodied, unhosted wallets and transferred peer-to-peer without passing through a licensed financial institution, the enforcement chokepoints that regulators depend on are significantly less effective against stablecoins than against traditional bank-based dollar deposits.
The paper draws a direct comparison between traditional foreign-currency bank deposits and stablecoins. Banks operating in a country are obligated to follow domestic rules, which gives governments a lever to restrict dollar-denominated accounts during a currency crisis. Stablecoins operate on permissionless blockchain networks. As the paper states, they are "partly circulating outside the regulatory perimeter." The study's co-authors, drawing from both BIS and IMF staff, conclude that FX restrictions are less effective against stablecoins than against foreign currency bank deposits.
The Scale of the Market
The numbers behind this warning are significant. USD stablecoin supply stood at roughly $292.6 billion at the time of publication, up from approximately $253 billion a year earlier.
The total stablecoin market across all issuers, including non-dollar-pegged tokens, sits in the range of $303 to $322 billion.
To put that in context: the combined stablecoin market cap now exceeds the foreign exchange reserves of 95 countries. Only 14 nations, including China, Japan, India, Russia, Taiwan, and Germany, hold more in FX reserves than the entire stablecoin market is worth.
Tether (USDT) accounts for roughly 59 to 60 percent of the stablecoin market, with a supply near $184 to $189 billion. USD Coin (USDC) holds approximately 24 percent. Together, the two tokens represent about 83 percent of the total market.
On-chain, Ethereum settles the largest share of stablecoin value at around $157 billion (50.7 percent of the total), while Tron handles approximately $89.9 billion (29 percent). Tron's prominence matters for this story: its near-zero USDT transfer fees make it disproportionately used for low-value stablecoin payments in Africa, South Asia, and Southeast Asia.
Nigeria and Pakistan: High-Vulnerability Case Studies
The BIS finding maps most directly onto countries that have experienced severe currency depreciation combined with capital controls. Nigeria is the clearest example. The naira lost more than 70 percent of its value against the US dollar between 2023 and 2025.
With formal dollar access restricted, households and businesses moved onto peer-to-peer crypto markets, and USDT became a practical substitute for dollar-denominated savings and cross-border payments. Nigeria recorded approximately $59 billion in total cryptocurrency transaction volume in 2024, according to Chainalysis. Stablecoins now represent an estimated 40 percent of Nigeria's crypto market. The country's own CBDC experiment, the eNaira, was effectively abandoned by users: by 2023, an estimated 98 percent of eNaira wallets were inactive, demonstrating that state-issued digital currency has not displaced demand for dollar-pegged alternatives.
Across Sub-Saharan Africa more broadly, stablecoins account for roughly 43 percent of all crypto transaction volume, the highest regional share globally.
Pakistan presents a similar risk profile: repeated currency crises, an IMF programme, capital controls, and a large remittance corridor (approximately $27 billion in FY2024).
The BIS paper notes that stablecoin adoption tends to accelerate during periods of banking instability or sovereign debt stress, and that this adoption pattern exhibits high persistence and proves difficult to reverse once established.
That warning about reversibility reflects the BIS's own historical analysis of dollarisation. Once stablecoins become embedded in how businesses price goods, send payments, or preserve savings, pulling them back out of the monetary system becomes a structural problem rather than a policy choice. This is an analytical inference drawn from the BIS framing rather than a declared finding of the paper itself.
India occupies a distinct position in the analysis. As one of only 14 countries holding more in foreign exchange reserves than the entire stablecoin market is worth, it faces less immediate pressure from currency substitution. The Reserve Bank of India has nonetheless taken a restrictive stance, opposing stablecoin adoption and imposing a 30 percent tax on crypto gains. Its own digital currency alternative, the e-Rupee, has seen negligible consumer adoption since its launch. That outcome reinforces a broader challenge for governments relying on central bank digital currencies as a counter to private stablecoins: the eNaira experience in Nigeria and the e-Rupee experience in India both suggest that supply-side CBDC deployment does not reliably suppress demand for dollar-pegged alternatives.
South Africa has already moved to pre-empt currency substitution. The South African Reserve Bank has indicated it is unlikely to sanction foreign currency-pegged stablecoins as domestic payment instruments. In regulatory guidance, the bank warned that doing so "may result in the risk of currency substitution ('dollarization'), which would weaken the monetary policy transmission."
What Regulators Can and Cannot Do
The BIS itself acknowledges the limits of the tools available to policymakers. In a related publication, its 2026 Annual Economic Report noted that "blocking domestic intermediaries from handling unapproved stablecoins may limit some transactions, but such measures are likely to remain imperfect."
That is a candid admission: the enforcement gap is real, and it will not close quickly.
The policy tension is sharpened by the fact that stablecoins provide genuine utility in high-cost remittance corridors. A Mercy Corps Ventures pilot in Kenya found that stablecoin-based payments reduced transaction fees from 29 percent to 2 percent for micropayments to freelancers. Kenya is a notable case in its own right: built on a mobile money infrastructure that serves tens of millions of users through platforms such as M-Pesa, and having passed its Virtual Asset Service Providers Bill in 2025, it represents a distinct adoption pathway where stablecoins are layering onto existing digital payment habits rather than replacing cash from scratch.
Sub-Saharan Africa paid an average of 7.9 percent to send $200 in remittances in 2023, the most expensive corridor in the world.
The utility case for stablecoins in these corridors complicates enforcement, as restrictions would fall hardest on the users who benefit most from lower transaction costs.
The broader regulatory picture is moving in two directions at once. The US, EU, and Japan are building frameworks that would bring stablecoins into formal financial oversight. Countries under active IMF programmes following debt crises or balance-of-payments stress, including Nigeria, Pakistan, Ghana, and Sri Lanka, face increasing pressure to restrict stablecoin capital flows.
For users and developers in those markets, an enforcement gap remains. But the pressure on regulators to close it is now formally on the record from both the BIS and the IMF.