Invest1 publisher3 min readPublished
Capital controls do less to hold back stablecoin flows than dollar deposits, BIS finds
BIS data on 130 economies show stablecoin flows rise with currency stress, as dollar deposits do, while appearing less affected by capital controls. Turkey's roughly $38 billion of lira swapped into stablecoins in a year shows how large that harder-to-block channel already is.
The Investor · Invest desk
What happened
- In Argentina, 94% of crypto bought with pesos went into stablecoins, according to a September Sphere Labs and SVB report on dollar demand.
- During a January 2025 US-Colombia dispute, Colombians moved money into digital dollars over a weekend when banks and exchanges were closed, the report says.
- A March BIS study of four dollar stablecoins across 27 currencies from 2021 to 2025 found rising demand could weaken local currencies and raise dollar costs in FX swaps.
- The European System of Central Banks proposed this month replacing MiCA's fixed bank-deposit reserve shares with rules based on how fast reserves can be made available.
- MELD co-founder Pankaj Bengani said close to half of the firm's business-to-business stablecoin offramp volume is in North America.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- constraint A central bank defending its currency with capital controls restrains dollar deposits at banks more than dollar tokens, so savers leaving the local currency can move to the channel it restrains least.
- cost Lenders in stressed currencies pay twice when savers buy dollar tokens: they lose local deposits, then pay more for dollars in FX swaps, most of all when they are already strained.
- exposure Weekend bank and exchange closures no longer pause flight into dollars, so a political shock on a Saturday can move money before a central bank's first working-day response.
- decision If the ESCB proposal is adopted, stablecoin issuers would size bank-deposit holdings around how fast reserves can be freed, replacing MiCA's fixed floor as the figure they plan to.
The BIS result on controls is a comparison. Stablecoin flows appeared less affected by capital controls than ordinary foreign-currency deposits [1], and the published summary does not put a size on the gap. On this evidence controls are weaker against tokens than against bank deposits.
Cointelegraph Magazine describes the slow version of the risk as a "drip-drip effect" that "can happen without a crisis, and may be harder to see as it unfolds" [14]. The BIS data tie the flows to stress. Across the 130 economies, both kinds of dollar holding grew during currency pressure and during banking or sovereign crises [1].
Turkey gives the slow version a size. Spread evenly across the year, an assumption because only the annual total is reported [4], the lira swapped into stablecoins comes to about $730 million a week, or roughly $104 million a day [1]. Argentina's flow is concentrated in one product: with stablecoins at 94% of peso crypto purchases [3], every other coin shares the remaining 6% [2].
Arnold Lee, chief executive of Sphere Labs [16], said: "When citizens in high-inflation economies move from local currency into digital dollars, monetary transmission weakens, deposit bases erode, and pressure builds faster than central banks can respond." [7] He also said: "Most of these economies are going to keep moving toward dollars" [5].
The case against the drain comes from corporate payments. Pankaj Bengani, a former Block executive and co-founder of stablecoin payments company MELD [17], said: "The vast majority of corporates in our data convert back to fiat immediately after the transaction settles. They are not taking a crypto position. They are using MELD as a settlement rail instead of SWIFT." [13] He said the biggest flows are cross-border commercial payments [18], a different population from peso savers. The magazine makes a related point, that stablecoins often still end up "as dollars in the bank" [15]. Conversion back to fiat helps a Turkish or Argentine lender only if the fiat is lira or pesos.
European rule-writers are working on the reverse flow. The ECB has warned that large stablecoin reserves could trigger a bank run [19]. MiCA requires issuers to hold at least 30% of reserves in bank deposits, and up to 60% for significant asset-referenced tokens [9]. Heavy redemptions under those floors would pull cash out of commercial lenders at once, and the central banks' liquidity-based alternative is aimed at that overnight case [10]. Tether chief executive Paolo Ardoino raised the same risk in 2024 when he called MiCA "very dangerous when it comes to stablecoins" [11].
The record fits more than one outcome. Tokens could become the dollar channel that controls restrain least, with deposits eroding as Lee describes. Most volume could instead stay a faster pipe into dollar accounts that would have been opened anyway. Or the nearer hit could come back through issuer redemptions, as the ECB fears. I think the first has the better evidence for Argentina and Turkey, because the controls result [1] and the swap-market result [6] both point at the token channel adding pressure of its own. MELD's numbers back the second, for invoice settlement. The view is wrong if lira and peso balances held in stablecoins flow back into local currency once the pressure eases.
What to watch
- A BIS estimate of the gap between how capital controls restrain stablecoin flows and how they restrain foreign-currency deposits.
- The final text of the ESCB's liquidity-based reserve proposal, including whether significant tokens keep any fixed bank-deposit share.
- Figures for Nigeria, the third market Sphere Labs and SVB tied to dollar demand, to test whether the Argentina and Turkey pattern holds there.