On July 21, three Bank for International Settlements economists published a working paper comparing how dollar-backed stablecoins and traditional foreign currency deposits behave under capital controls across more than 130 economies.
The findings are blunt. Countries that restrict foreign exchange accounts see far fewer dollars sitting inside domestic banks, but stablecoin inflows stay roughly the same whether those restrictions exist or not.
During 2022 and 2023, median gross stablecoin inflows ran between 1% and 1.5% of GDP in restricted economies and in open ones alike. Foreign currency deposits told a completely different story: the median share dropped to around 5% under approval restrictions, versus more than 30% where no such rules applied.
Authors Boris Hofmann, Aaron Mehrotra and Jan Paulick titled the paper "Dollarisation and Monetary Control: What Lessons for the Rise of Stablecoins?" The views are theirs, not an official BIS position.
The core problem for regulators is structural. Traditional capital controls work through banks. Governments can require approval before residents open dollar accounts, cap foreign currency purchases, or block cross-border wire transfers through domestic institutions. Public blockchains sit largely outside that chain of command.
Residents in restricted markets can now get dollar exposure through a crypto wallet without ever touching a foreign currency bank account or physically moving cash across a border. That route bypasses the pressure point governments have historically relied on during currency crises or capital flight episodes.
The paper also flags that a history of banking crises is one of the stronger predictors of stablecoin demand in emerging markets. Once digital dollarization takes hold, it tends to stick, much like conventional dollarization did in economies such as Ecuador or Zimbabwe.
On the regulatory side, the authors note that frameworks like the EU's MiCA target stablecoin issuers rather than the permissionless transfers themselves. That leaves a gap: you can regulate who mints USDC, but you cannot easily regulate every peer-to-peer wallet transaction on a public chain.
Broad capital controls, FX restrictions, payment limits and even rules aimed specifically at stablecoins all showed no statistically significant effect on inflows in the study's formal analysis.
This article is for informational purposes only and does not constitute financial or investment advice.
