Central bankers fear dollar-based stablecoins threaten monetary sovereignty

The world’s central bankers have a new nemesis, and it’s not inflation. It’s Tether. Dollar-pegged stablecoins are increasingly viewed by monetary authorities as a direct threat to their sovereignty over domestic currencies, according to growing warnings from institutions including the European Central Bank, the Bank for International Settlements, and the International Monetary Fund. The concern boils down to something economists have worried about for decades, just dressed in new clothes: digital dollarization. Jennie Levin, who has been involved in Bank of England consultations on the topic, has emphasized the urgent need for stablecoin regulation given their expanding influence on global finance. The consensus among central banking circles is striking for what it concedes: official central bank digital currencies are not seen as an effective counter to the rise of private dollar stablecoins. The dollarization problem, now with blockchains A June 2025 paper described US stablecoins as posing “severe risks” to monetary sovereignty in both the eurozone and across the global south. The mechanism is straightforward: when people in, say, Argentina or Nigeria convert their local curren...