The global digital finance is developing rapidly, and stablecoins have evolved from niche tools in the crypto space to new types of digital assets with cross-border payment and value storage functions, profoundly impacting the international monetary landscape. In May 2026, the Bank for International Settlements (BIS) released Working Paper No. 170, which systematically analyzed the development characteristics, operating mechanisms, and impact on the international monetary system of stablecoins, and proposed three future scenarios and regulatory approaches. The report believes that stablecoins will strengthen the dominance of the US dollar in the short term and pose a risk to the monetary sovereignty of emerging market and developing economies (EMDEs), while the long-term trend depends on their adoption model, regulatory response, and digital financial ecosystem collaboration.

Stablecoins are privately issued blockchain tokens pegged to fiat currencies or assets to maintain price stability, combining payment and store of value functions. Since the first stablecoin was launched in 2014, the industry has grown exponentially; in 2026, there will be over 300 active stablecoins worldwide, with a total market capitalization exceeding $300.00B. From a market structure perspective, stablecoins exhibit high concentration and US dollar dominance. In terms of quantity, US dollar-pegged stablecoins account for approximately 64%; in terms of market capitalization, US dollar stablecoins account for as high as 98%, with USDT and USDC dominating the market, and other currency-pegged stablecoins being extremely small in scale.

In terms of reserve assets, mainstream fiat currency-pegged stablecoins use US short-term Treasury bonds, reverse repurchase agreements, and cash equivalents as core reserves. Some issuers lack transparency and sufficient auditing, and there are still potential redemption risks. Currently, the application of stablecoins is still mainly within the crypto ecosystem, serving as a pricing and settlement medium for crypto asset transactions, and as collateral in decentralized finance (DeFi) lending and liquidity protocols. After excluding high-frequency trading, wash trading, and other automated virtual volumes, the actual transaction volume is only 1% of the nominal volume, and the retail scenario (single transaction amount less than $250.00) accounts for less than 0.9%. Cross-border remittances, retail payments, and other real economy scenarios are still in the early pilot stage. However, in emerging markets with high inflation and sharp exchange rate fluctuations, the cross-border flow of stablecoins continues to climb, becoming a hidden channel to avoid currency devaluation and bypass capital controls.

The operation of stablecoins adopts the “on-chain circulation + off-chain reserve” model: the issuer collects fiat currency at a 1:1 ratio and mints tokens, users hold them through digital wallets, and rely on public chains to achieve 24/7 global transfers. Reserve assets are used for redemption to maintain the pegged exchange rate. This model combines the characteristics of 19th-century private bank notes, the Eurodollar market, and money market funds (MMF), and is essentially an on-chain private claim on offshore US dollars, extending US dollar liquidity through financial innovation.

Unlike the traditional Eurodollar market, stablecoins have no bank credit elasticity or central bank liquidity support, and their stability depends entirely on the quality of reserve assets and market arbitrage mechanisms. The collapse of TerraUSD in 2022 and the temporary decoupling of USDC in 2023 both show that stablecoins without sufficient high-liquidity reserves are extremely vulnerable to de-anchoring under pressure. Currently, global regulators have reached a consensus: focus on regulating fiat currency-backed stablecoins and reject algorithmic stablecoins. From the perspective of risk transmission, stablecoin reserves are concentrated in US short-term Treasury bonds, forming a transmission chain of “global demand → stablecoin issuance → increased holdings of US debt,” which directly affects US Treasury yields and the transmission efficiency of the Federal Reserve’s monetary policy.

The report relies on the Cohen-Kenen international currency function framework to systematically assess the impact of stablecoins on the international monetary system from the three major functions of unit of account, medium of exchange, and store of value, as well as the two major sectors of private and official. The conclusion shows that stablecoins have the most direct impact on the store of value and medium of exchange functions of the private sector, and a limited impact on the unit of account and official sector functions, but will implicitly constrain monetary policy autonomy.

In high-inflation emerging markets, US dollar stablecoins do not require foreign currency accounts and can be held anonymously across borders, making them the preferred choice for residents to hedge against risks, forming “implicit dollarization.” The inflow of stablecoins is highly correlated with local currency depreciation and widening exchange rate spreads, squeezing local currency deposits and weakening the central bank’s ability to regulate. At the same time, stablecoins have the advantages of real-time settlement, no business hour restrictions, and low fees, and are rapidly penetrating scenarios such as cross-border remittances and e-commerce, further reducing the friction of using the US dollar and expanding the US dollar’s share in retail cross-border payments and e-commerce transactions.

Trade invoicing and contract pricing have strong path dependencies. Stablecoins have not yet changed the pattern of global trade being denominated in US dollars and euros, and are only used sporadically in some retail scenarios in high-inflation economies, and have not yet formed a systemic replacement. Central banks of various countries have not yet included stablecoins in foreign exchange reserves or exchange rate intervention tools, and official pricing and intervention functions have not been directly impacted. However, widespread use of stablecoins by the private sector will lead to the failure of capital controls and hinder the transmission of monetary policy, exacerbating the “trilemma”: the degree of financial openness is passively increased, and the conflict between exchange rate stability and monetary policy autonomy is intensified.

The report constructs three mutually exclusive and parallel future scenarios based on adoption scale, regulatory environment, and cross-border impact:

Scenario 1: Niche Adoption (Baseline Scenario). Stablecoins remain limited to the crypto ecosystem, with limited penetration into the real economy. Localized holdings appear in high-inflation countries, and retail payments and trade settlement are still mainly in local currencies. Regulation focuses on anti-money laundering and consumer protection, the scale of capital flow spillover is small, the monetary sovereignty and financial stability of emerging markets are basically controllable, and the central bank retains complete policy autonomy. This scenario is more in line with current market characteristics and is the most likely trend in the short term.

Scenario 2: Digital Dollarization (High-Risk Scenario). US dollar stablecoins become the de facto standard for cross-border retail payments and domestic pricing in emerging markets, banks provide related services, and deposit dollarization accelerates. Local currency policies become ineffective, capital controls are virtually non-existent, and domestic savings flow to US Treasury bonds through stablecoins, shrinking the local credit market. Exchange rate transmission effects are exacerbated, and stablecoin run risks directly impact the financial stability of emerging markets, forming an irreversible digital dollar dependence. This scenario has a far greater impact on monetary sovereignty than traditional dollarization and is an extreme risk that emerging markets need to focus on preventing.

Scenario 3: Local Currency Stablecoin Integration (Ideal Scenario). Emerging markets authorize licensed institutions to issue local currency stablecoins through regulation, and interconnect them with domestic fast payment systems and central bank digital currencies (CBDC). Reserve assets are limited to local currency government bonds and central bank deposits, achieving a balance between technical efficiency and policy autonomy. Stablecoins are used for government payments, e-commerce settlement, and securities clearing, which can not only improve payment efficiency and financial inclusion but also avoid the risk of foreign currency substitution. However, this scenario requires完善的监管能力、金融基础设施与宏观稳定支撑，多数低收入新兴市场暂不具备实施条件.

The cross-border nature of stablecoins determines that regulation by a single country is difficult to be effective. The report proposes four core policy directions: First, unify global regulatory standards, implement the Financial Stability Board (FSB) stablecoin regulatory recommendations, clarify reserve requirements, disclosure rules, and redemption mechanisms, and avoid regulatory arbitrage; second, strengthen cross-border cooperation, establish regulatory information sharing and risk disposal mechanisms between issuing and using countries to cope with cross-border runs and capital flow shocks; third, upgrade local defenses, emerging markets should improve macroeconomic stability, optimize local payment systems, and promote CBDC construction to hedge the attractiveness of foreign currency stablecoins; fourth, prevent and control illegal activities, use blockchain traceability technology to combat money laundering, terrorist financing, and other abuses, and balance innovation and risk.

In conclusion, stablecoins are not a simple financial innovation but a structural force reshaping the international monetary hierarchy. In the short term, it may strengthen the hegemony of the US dollar and exacerbate the financial subordination of emerging markets; in the long term, it depends on global regulatory coordination, innovation in local currency digital tools, and market adoption paths. For emerging markets, stablecoins are a double-edged sword with both opportunities and risks: they can improve payment efficiency and promote financial inclusion, but they may also trigger digital dollarization and erode monetary sovereignty. In the future, the global monetary system will enter a new stage in which public digital currencies (CBDC) and private digital currencies (stablecoins) coexist, and fiat currencies compete with digital dollars. Only through sound macroeconomic policies,完善的监管框架与国际协同，才能在拥抱技术红利的同时，守住金融安全与货币主权底线，避免陷入新型数字金融从属困境.

[China Financial Case Center]