BIS calls for international coordination on stablecoin regulation as dollarisation risks grow
The central banks' central bank is concerned that without coordination stablecoins might reshape capital flows and exchange rate dynamics, compromising monetary sovereignty.
The Bank for International Settlements has used a special chapter in its forthcoming Annual Economic Report to make what may be its clearest call yet for internationally coordinated regulation of stablecoins, arguing that the rapid growth of privately issued digital dollars risks creating cross-border spillovers that no single jurisdiction can manage alone.
The chapter, titled Anchoring trust in money: innovation beyond stablecoins, is an advance release from the BIS Annual Economic Report and comes as policymakers around the world race to establish regulatory frameworks for stablecoins and tokenised finance.
While the BIS reiterates many of its longstanding concerns about stablecoins, the report places unusual emphasis on the need for coordinated international action. The institution argues that stablecoins are inherently cross-border instruments and that fragmented regulatory approaches could encourage arbitrage, market fragmentation and spillovers across jurisdictions.
“The unifying principle is that technology should serve — not undermine — the core public good functions of money,” yet, as the BIS continues, there is a risk of “stablecoin dollarisation” in emerging market and developing economies “where demand for foreign stablecoins could reshape capital flows, affect exchange rate dynamics and challenge monetary sovereignty.”
This, in turn, “calls for robust, internationally coordinated approaches that strengthen safeguards for users and mitigate adverse spillovers arising from stablecoins across markets and jurisdictions.”
That emphasis on international coordination is notable because there has so far been relatively little formal coordination between countries on the issue. One of the few explicit international commitments came in 2021, when G7 finance ministers and central bank governors pledged that both stablecoin and central bank digital currency initiatives should respect each other’s monetary sovereignty.
