Bank for International Settlements economists Boris Hofmann, Aaron Mehrotra, and Jan Paulick published a working paper in July 2026 comparing stablecoin adoption in emerging markets to deposit dollarization across more than 130 economies. The research found that capital controls reduced bank dollarization by up to 32 percentage points but showed no statistically significant effect on stablecoin inflows. The paper analyzed deposit dollarization data from 1990 to 2019 and stablecoin flow data from Chainalysis covering 184 countries from 2017 to 2024, concluding that stablecoins operate outside the reach of traditional capital-flow management tools.
Stablecoin market capitalization nearly tripled since 2023, driven primarily by Tether's USDT and Circle's USDC, which together comprise more than 80% of total stablecoin market capitalization according to the paper. Gross stablecoin inflows relative to GDP rose from essentially zero across countries in 2019 to a median of approximately 1.2% of GDP in 2021, with some countries recording inflows near 7% of GDP. By 2023, the median had declined to roughly 0.9% of GDP.
BIS Study Identifies Similar Economic Drivers for Stablecoins and Bank Deposits
The researchers found that deposit dollarization and stablecoin inflows respond to similar economic pressures. Both rise when a country's exchange rate passes through strongly into local inflation, and both increase during financial crises.
Banking crises correlate with higher stablecoin inflows but not with higher deposit dollarization. Sovereign debt crises show the opposite pattern, increasing deposit dollarization by 4 to 6 percentage points over a decade with minimal effect on stablecoin inflows. The authors attribute the banking-crisis link to stablecoins operating outside the traditional banking system, making them more attractive when banks are the source of instability.
Capital Controls Reduced Bank Dollarization by 32 Percentage Points But Not Stablecoin Inflows
Countries requiring approval for residents to hold foreign-currency bank accounts recorded deposit dollarization ratios around 25 to 32 percentage points lower than countries without those restrictions, based on data from 2000 to 2016. Stablecoins showed no such response, with researchers finding no statistically significant relationship between restrictions on cross-border stablecoin use and the size of stablecoin inflows.
The paper attributes this difference to where each asset circulates. Bank deposits sit inside regulated institutions that supervisors can reach directly. Stablecoins move on public blockchains and can sit in unhosted wallets, outside the reach of the same regulatory framework.
Dollarization Persistence Coefficient Remained Near 0.8 Across Economies
Both forms of dollarization demonstrated high persistence in the data. Once a country's deposit dollarization ratio rises, it tends to stay elevated even after the inflation or crisis that triggered it has passed. Autoregressive estimates placed the persistence coefficient near 0.8 across both advanced and developing economies, a figure unchanged since 2000.
The researchers found limited evidence that stablecoins are replacing bank deposits as a dollar-holding vehicle. The findings suggest stablecoin demand in emerging markets comes from different users, possibly younger and more tech-focused, rather than shifting existing dollar deposits into crypto form.
Inflation-at-Risk Model Found Nonlinear Relationship in 91 Economies
Using an inflation-at-risk model applied to 91 emerging and developing economies, the authors found that the relationship between dollarization and inflation is not linear. Countries with very low dollarization showed no meaningful inflation effect. Countries with moderate dollarization showed somewhat higher inflation risk across the distribution. Countries with the highest dollarization levels showed lower inflation risk, particularly at the upper end of the distribution.
The authors describe highly dollarized economies as effectively importing the credibility of the U.S. dollar as an anchor. The paper found limited evidence that dollarization changes how monetary policy shocks pass through to growth, inflation, or exchange rates.
The authors caution that stablecoin adoption may not continue expanding at its recent pace and that lessons from decades of bank dollarization may not fully apply to a system built to operate outside supervised finance.
FAQ
What did the BIS working paper published in July 2026 find about capital controls and stablecoins?
The paper found that capital controls reduced bank dollarization by 25 to 32 percentage points based on data from 2000 to 2016, but showed no statistically significant effect on stablecoin inflows. The researchers attribute this to stablecoins moving on public blockchains and sitting in unhosted wallets outside the reach of traditional regulatory frameworks that apply to bank deposits.
How did stablecoin inflows relative to GDP change from 2019 to 2023?
Gross stablecoin inflows relative to GDP were essentially zero across countries in 2019. By 2021, the median inflow rose to approximately 1.2% of GDP, with some countries seeing inflows near 7% of GDP. By 2023, the median had declined to roughly 0.9% of GDP according to Chainalysis data covering 184 countries from 2017 to 2024.
What persistence coefficient did the BIS study find for dollarization?
Autoregressive estimates placed the persistence coefficient near 0.8 across both advanced and developing economies, a figure that has not changed since 2000. This means once a country's deposit dollarization ratio rises, it tends to stay elevated even after the inflation or crisis that triggered it has passed.
