For a household facing high inflation or currency depreciation, moving savings into a dollar-backed stablecoin can be a perfectly rational decision. A digital wallet offers access to a dollar-denominated asset without physical banknotes or an offshore account. In Argentina, this use case is already visible: Chainalysis data found stablecoins accounted for 61.8% of crypto transaction volume in the country in its 2024 regional analysis, above the global average of 44.7%.
Yet what is rational for an individual may produce wider costs when adopted at scale. In Latin America, stablecoins can accelerate a much older phenomenon: dollarisation.
Dollarisation without the old barriers
Bitcoin and dollar-backed stablecoins are fundamentally different. Bitcoin is not anchored to any national currency. USDT, USDC and similar instruments instead use digital infrastructure to reproduce the value of the dollar. Traditional dollarisation involved frictions associated with physical banknotes, foreign-currency accounts or intermediaries. Stablecoins reduce these barriers dramatically.
The Bank for International Settlements estimates that around 98% of stablecoin value is dollar-denominated and warns that digital dollarisation can pose acute risks to monetary sovereignty in emerging market and developing economies. A household converting a depreciating currency into USDT may preserve its purchasing power; if households and firms do so at scale, savings, payments and pricing can migrate towards dollar-denominated instruments. That turns payments innovation into a monetary policy problem.
When private protection creates a public cost
Money is a medium of exchange, store of value and unit of account, but also an institution through which economic policy operates. If households and businesses increasingly move into foreign-currency instruments, the space for domestic monetary policy operates can narrow.
BIS research covering more than 130 economies finds that both deposit dollarisation and stablecoin flows are persistent, while stablecoin flows appear largely unaffected by foreign-exchange and capital-flow restrictions. Stablecoins do not create distrust in domestic currencies; they make acting on it easier. Citizens cannot be expected to absorb inflation merely to defend monetary sovereignty, but policy-makers should not treat an individually rational hedge as automatically benign at the systemic level.
The privatisation of dollarisation
There is another dimension. Under conventional dollarisation, households replace domestic currency with US dollars or dollar-denominated deposits. With stablecoins, the mechanism is more indirect: users hold privately issued tokens designed to maintain parity with the dollar, while issuers invest the reserves backing those tokens, often heavily in US government securities.
The distribution of benefits is therefore unusual. The individual gains protection against depreciation, while the issuer earns income from managing the reserves backing its tokens. For the US, growing demand for dollar-backed stablecoins could translate into additional demand for US Treasuries held as reserve assets. All else equal, stronger demand for Treasury securities can support their prices and put downward pressure on yields, thereby reducing the US government’s cost of borrowing at the margin.
It is important to note that stablecoins are not official dollars and their international adoption should not be treated as equivalent to conventional dollarisation or to the dollar’s role as an international reserve currency. Their connection to US monetary power is more indirect, operating through their dollar denomination and, crucially, through the reserve assets that issuers hold.
US Treasury Secretary Scott Bessent has nevertheless explicitly presented this mechanism as beneficial to the US, arguing that stablecoin growth could increase demand for US Treasuries and strengthen the dollar-centred financial system.
Tether, for example, reported around $141bn of direct and indirect exposure to US Treasury bills at end-March 2026. For the US, such reserve demand can therefore generate a financing benefit. For economies experiencing currency substitution, however, the corresponding systemic benefit is far less evident.
Private monetary power and public accountability
Stablecoins also raise a broader question of accountability. Commercial banks are private businesses, but because they perform systemic monetary and financial functions, they operate under extensive prudential supervision, capital and liquidity requirements, governance rules and resolution frameworks. Central banks face an even higher degree of public scrutiny because monetary power has economy-wide consequences. Stablecoin issuers are developing along a different institutional path, despite the growing monetary relevance of the liabilities they issue.
Tether, issuer of the world’s largest stablecoin, is a particularly revealing case. Its chairman and co-founder, Giancarlo Devasini, has maintained a notably limited public profile despite the company’s growing importance in global financial markets. A 2026 Italian television investigation drew attention to the scarcity of public interviews with him and documented an attempt by a journalist to question him directly. This does not imply wrongdoing, nor should limited media exposure be treated as such. The relevance is institutional: when a privately controlled company issues liabilities used by millions of people as a store of value, means of payment and substitute for domestic currency, the degree of public scrutiny surrounding its governance becomes a legitimate policy concern.
Financial scrutiny has also strengthened. In August 2026, KPMG US completed Tether’s first full independent audit of its 2025 financial statements and issued an unqualified opinion. This is an important development; however, financial transparency and public accountability are not the same thing.
The distinction is essential because money is not an ordinary private product. Its use affects payments, savings, credit conditions and ultimately the transmission of monetary policy. Banks are not allowed to perform systemic financial functions without extensive regulation simply because they are privately owned. As stablecoin issuers become increasingly important to monetary and financial systems, it becomes harder to justify treating them as ordinary technology or payments companies. The question is therefore not whether Tether, Devasini or other issuers should be treated like central banks, but whether private monetary power of this scale can continue expanding without a corresponding increase in regulatory oversight and public accountability.
Monetary sovereignty requires drawing a line
This is why conventional stablecoin regulation may prove insufficient. Reserve requirements, redemption rights, disclosure and issuer supervision make these instruments safer, but they do not solve the problem of currency substitution. A well-regulated dollar stablecoin can still weaken monetary sovereignty if it becomes a large-scale substitute for domestic money.
Latin American authorities should therefore distinguish between financial innovation and systemic monetary substitution. Where foreign stablecoins begin materially replacing domestic money in savings, payments or pricing, policy-makers should be prepared to consider restrictions on their distribution, promotion and domestic use. The objective is not to prohibit innovation as such, but to prevent privately issued foreign-currency instruments from eroding the effectiveness of domestic monetary policy.
Governments still bear responsibility: price stability, credible institutions, sustainable public finances and efficient payment systems remain the strongest defence against dollarisation. But monetary sovereignty is also a legitimate public-policy objective. Money is not an ordinary financial product: it is a core institution through which states organise economic activity and conduct monetary policy. Changes in who issues money-like instruments therefore deserve scrutiny proportionate to their systemic consequences. States routinely restrict activities that generate systemic externalities even when they provide benefits to individual users.
The question for Latin American central banks is therefore how much substitution of domestic money they are prepared to tolerate before individual financial choice begins to impair society’s collective capacity to conduct monetary policy. Stablecoins did not create Latin America’s demand for dollars, but they have created an infrastructure through which dollarisation can become faster, borderless and harder to reverse. That makes digital dollarisation a question not just of innovation, but of monetary sovereignty and institutional responsibility. Policy-makers should decide where that boundary lies before digital dollarisation becomes structural.
Marta Bisol is a Policy Analyst and Luigi Capoani is Founder and President of the European Youth Think Tank.
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