Every year, billions of dollars move across borders through remittances, trade payments, and business transactions. The system works, but it carries real costs; bank transfers take days, fees erode the value of remittances, and frictions are even more pronounced where banking infrastructure is limited. Stablecoins, which are privately issued digital tokens pegged to a stable reference currency, have grown in popularity because they address some of these inefficiencies. But a recent paper by the Bank for International Settlements (BIS), titled ‘The impact of stablecoins on the international monetary and financial system’ argues that the implications of their growth extend well beyond faster, cheaper payments.
The Promise of the Technology
Stablecoins are distinct from crypto-assets like Bitcoin or Ethereum, whose values fluctuate widely. They are designed to hold stable value by being pegged 1:1 to a reference asset like sovereign currencies, such as the dollar or INR. As the paper highlights, approximately 98% of stablecoins value is denominated in US dollars. Because stablecoins operate on public blockchains, they are available around the clock, transferable without a bank account, and capable of settling transactions near-instantly.
For cross-border payments, particularly in corridors where legacy banking infrastructure is slow or expensive, these are genuine advantages. The BIS paper documents growing stablecoin activity across parts of Africa, Latin America, and Asia, and finds that in some corridors, cross-border stablecoin flows have already surpassed those of Bitcoin and Ethereum.
The Catch
But the same features that make stablecoins attractive for payments also make them attractive for something else: quietly moving savings out of local currencies and into dollars. The BIS finds that this is common in economies experiencing high inflation and currency depreciation, fuelling stablecoin adoption. In these contexts, residents are not primarily using stablecoins to send money home; they are using them to protect the value of what they already hold.
This distinction carries serious consequences. When residents can shift savings into dollar stablecoins at the first sign of economic stress, central banks lose monetary policy traction. Interest rate decisions matter less when a growing share of savings sits outside the domestic financial system. Capital flow management becomes harder to enforce when transfers happen through pseudonymous blockchain transactions, outside the visibility of conventional banking data. The BIS describes this dynamic as “stealth dollarisation”: gradual, difficult to monitor, and potentially very hard to reverse.
Three Ways This Could Unfold
The paper does not offer a single prediction. Instead, it maps three plausible trajectories. In the most contained scenario, stablecoins remain primarily instruments for crypto traders, with cross-border payment use growing slowly and remaining modest relative to the broader payments system. In a more disruptive scenario, dollar stablecoins become the default cross-border payment infrastructure across emerging economies, accelerating currency substitution and meaningfully eroding monetary sovereignty. A third path, more optimistic but also more demanding, sees countries licensing their own local-currency stablecoins, capturing the efficiency benefits of the technology while retaining control over their monetary systems. BIS admits that domestic stablecoin integration is attractive from a policy standpoint but notes that many jurisdictions are still in the process of building the regulatory capacity and institutional coordination that it requires.
The Stakes
Cross-border payments are overdue for structural improvement. The friction and cost embedded in the current system are real, and stablecoins offer credible solutions to many of them. But the BIS paper is a reminder that the countries best positioned to benefit from stablecoin-driven payment innovation will be those that move deliberately: building regulatory frameworks, strengthening domestic payment alternatives, and ensuring that efficiency gains do not quietly displace monetary sovereignty.
The infrastructure of global payments is being rebuilt. The decisions made now about how to govern that process will determine who sets the terms.