New York Fed says stablecoins may weaken capital controls during crises

Researchers at the Federal Reserve Bank of New York said in a recent report that rising stablecoin use could weaken the ability of countries facing financial and currency crises to enforce capital controls. The report said demand for dollar-pegged stablecoins has been seen rising in countries undergoing currency crises. It said stablecoins allow individuals to access dollars without going through domestic banks, which could reduce the effectiveness of measures governments have traditionally used to control capital flows. The researchers added that with the stablecoin market already exceeding $300 billion and expected to grow to the trillions of dollars in the coming years, capital controls could become even harder to enforce in future currency crises.