The Bank for International Settlements has issued a stark warning. In its Annual Economic Report, the BIS states that dollar-pegged stablecoins are not creating a new monetary paradigm. They are accelerating "stablecoin dollarization," reinforcing the US dollar's dominance.
The numbers are overwhelming. Over 99% of the roughly $320 billion stablecoin market is tied to the US dollar. Tokens like Tether's USDT and Circle's USDC dominate. The BIS frames this not as progress, but as a structural risk.
The concern is acute for emerging markets. During financial stress, citizens rush into these dollar-linked tokens. The BIS likens this to a digital bank run on local monetary systems.
The report also criticizes the fundamental design of stablecoins. It argues they fail core monetary properties like singleness, elasticity, and interoperability. The comparison is pointed: the BIS views them more like shares in an exchange-traded fund than as actual money.
The US Genius Act, passed in 2025, actively encourages dollar-pegged stablecoin growth to extend USD dominance. The BIS modeled that even at massive scale, stablecoin activity could have "modestly negative" net economic effects. The mechanism involves rising bank funding costs as deposits flow into stablecoin reserves, tightening credit.
For investors, the implication is clear. The dollarization concern for emerging market assets is real. For the broader crypto market, this "not real money" framing could significantly influence future regulation, capital requirements, and risk frameworks.