Stable coins: Bank for International Settlements warns emerging economies are gradually dollarizatio

Annual Report of the Bank for International Settlements: Stabilocins have not yet fully functional as currencies, and digital dollarization threatens the sovereignty of emerging economies.

Brief summary

The Bank for International Settlements believes that stablecoins have not yet truly performed all functions of money and have several structural limitations.

The report warns that when households use stablecoins anchored to the dollar as a store of value, it may lead to dollarization in emerging economies.

The Bank for International Settlements pointed out that more than 99% of stablecoins are still pegged to the U.S. dollar, with USDT and USDC dominated.

The agency believes that the large-scale spread of stablecoins may change the financial balance by driving up bank financing costs.

The Bank for International Settlements proposes an alternative based on regulated tokenization and a unified ledger that connects public and private digital currencies.

The Bank for International Settlements questions the status of stablecoins in the monetary system

The Bank for International Settlements pointed out in its 2026 annual economic report released at its annual shareholders \'meeting in Basel, Switzerland that the current stablecoins do not fully perform the expected functions of real money. The agency evaluated several key criteria such as uniqueness, flexibility, interoperability and integrity. Its research results show that existing models still have significant limitations in these aspects. This review puts anchor tokens at the heart of discussions on the future of digital payments.

The Bank for International Settlements also explained that stablecoins may deviate from their reference values in the secondary market. In addition, its exchange mechanism is still complex for daily use. The report therefore compares the way stablecoins operate to exchange-traded fund shares rather than real currencies. This analysis echoes previous statements by the General Manager of the Bank for International Settlements about its financial attributes.

However, the market size is still limited compared to the traditional banking system. The Bank for International Settlements estimates that as of the end of May, the total value of stablecoins was approximately US$320 billion. More than 99% of those assets are still pegged to the US dollar, and are dominated by Tether\'s USDT and Circle\'s USDC.

Digital dollarization raises concerns about emerging economies.

The report highlights a phenomenon called \"stablecoin dollarization\": some households use tokens anchored to dollars as a store of value. This approach could alter capital flows and weaken the influence of the local currency. The Bank for International Settlements believes that this evolution poses a challenge to the monetary sovereignty of many emerging economies.

The author also studied the economic consequences of large-scale adoption of stablecoins based on the reserves held by stablecoins issuers. Its models suggest that in the medium term, significant expansion could drag down output slightly. Higher bank financing costs and reduced credit will offset the benefits of public debt demand. The report points out that even at very high levels of capitalization, the negative effects in the scenarios studied are still limited. The Bank for International Settlements also warned that these assets account for a significant proportion of illegal activity on certain blockchains. When users hold self-managed wallets, related transaction control becomes more difficult.

After the limitations of digital tokens, move towards a new monetary architecture?

Faced with the identified difficulties, the Bank for International Settlements proposes a different path based on consistent international rules. The goal is to integrate tokenization into existing central bank and commercial banking systems. This direction aims to maintain monetary stability while supporting digital innovation.

The bank specifically proposed the concept of a unified ledger that brings together multiple forms of tokenized currency. The model will include central bank reserves, commercial bank currencies and other regulated private assets. In this architecture, the central bank\'s currency will maintain its benchmark status. In addition, the report also cited the Agora project as an experimental case to test the method. This cross-border payment prototype unites multiple central banks and private institutions. According to the report, the initiative demonstrates the possible direction in which global financial infrastructure can develop.

In the short term, stablecoins will continue to drive discussions on the transformation of digital currencies and the evolution of the cryptocurrency industry. The expansion of its use could intensify more debate around dollarization and the rules necessary to bind these new tools.