BIS chief warns stablecoins could trigger digital dollarization

Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), warned that the rising use of dollar-linked stablecoins could trigger digital dollarization in emerging economies, particularly in Latin America. Speaking at the Jackson Hole central bankers' symposium, he noted that this trend threatens monetary sovereignty and the ability of nations to control interest rates and domestic prices.

This shift may weaken internal monetary policy transmission by linking local economic conditions more closely to external policy stances. The BIS has previously warned that in countries with unstable currencies, such as Argentina and Venezuela, the adoption of the dollar—or digital equivalents—increases capital flow volatility and reduces central bank control.

Additionally, Hernández de Cos highlighted concerns regarding the use of stablecoins for illicit transactions, emphasizing the need for strengthened financial supervision. He also noted that the U.S. state of Wyoming has taken the initiative to issue the Frontier Stable Token (FRNT), a public stablecoin backed by the dollar.