Six Decades of Bond Data Confirm Structural Dollarisation: EMI Product Teams Face a Correspondent Banking Decision
The international debt securities market has grown from $2 billion in 1970 to $30 trillion at end-2024, according to research published this month by the Federal Reserve Board and the Bank for International Settlements. The study, authored by economists Swapan-Kumar Pradhan, Eswar Prasad, Előd Takáts and Judit Temesvary, finds no sustained de-dollarisation trend across this period. Instead, the dollar's share of international bond issuance follows a "wavelike pattern", three distinct dollarisation waves since the 1960s, with the most recent, following the global financial crisis, returning the dollar's share to levels seen at the euro's launch in 2000.
This matters because it reframes a central assumption embedded in many EMI product strategies: that dollar exposure in cross-border finance is either declining or represents outsized risk. The data suggests otherwise. Private sector borrowers, the entities that drive cross-border commercial flows, continue issuing in foreign currency, mainly US dollars, even as governments increasingly borrow in domestic currency. The dollar's persistence isn't a monetary policy artefact or a temporary market condition. It reflects the revealed preferences of institutional borrowers who need to move value across borders.
The infrastructure that traditionally served this dollar-denominated movement is deteriorating. BIS data shows the number of active correspondent banking relationships has declined by more than 20 percent since 2011, with the retreat evident across all regions. Payment volumes have continued to grow over the same period, creating a widening gap between demand for cross-border dollar flows and the correspondent banking capacity to serve them. Smaller markets and emerging economies have experienced the sharpest reductions, with some corridors becoming functionally disconnected from the traditional banking network.
The decline isn't mysterious. Correspondent banking has become economically unattractive for global banks facing heightened compliance burdens, tighter capital requirements, and regulatory uncertainty about customer due diligence obligations. The BIS has noted that banks cite compliance risks as the primary reason for exiting correspondent relationships. The result is a concentrated, contracting network handling increasing volumes, a structural fragility in the plumbing of dollar-denominated international finance.
Stablecoins have entered this gap not as a speculative asset class but as settlement infrastructure for the same dollar-denominated flows that correspondent banking has historically served. In December 2025, Visa announced the launch of USDC settlement in the United States, enabling issuer and acquirer partners to settle obligations in stablecoins over the Solana blockchain with seven-day availability. The move followed the GENIUS Act, signed into US law in mid-2025, which established federal reserve requirements, monthly disclosures, and Bank Secrecy Act compliance for payment stablecoins. The regulatory framework transformed stablecoins from a legal grey zone into a defined category with explicit institutional safeguards.
The institutional response has been rapid. Banks and payment networks are now embedding stablecoin rails into treasury operations, treating tokenised dollar balances as liquidity management tools rather than cryptocurrency exposure. Circle's USDC has been integrated into Finastra's Global PAYplus platform, enabling fiat-originated payments to settle in stablecoins behind the scenes. European banks have launched a consortium to issue a euro-denominated stablecoin under MiCA supervision. The infrastructure is being built not to replace correspondent banking but to parallel it, offering the same dollar settlement function through programmable, blockchain-based rails.
For EMIs serving institutional cross-border clients, this creates a strategic tension that product decisions cannot avoid. The G20 Roadmap for Enhancing Cross-Border Payments, coordinated by the Financial Stability Board since 2020, has set quantitative targets for cost, speed, transparency and access improvements by 2027. The FSB's 2025 progress report acknowledges that "the average global cost of such payments remains sticky" and that only 35 percent of cross-border retail payments are credited within one hour of initiation, far short of the 75 percent target. Traditional rails are not meeting institutional expectations, and the policy infrastructure has not accelerated improvement at the pace regulators hoped.
Stablecoin settlement offers a practical alternative for specific use cases, particularly B2B cross-border payments and treasury operations where speed and cost efficiency outweigh concerns about adopting new technology. Institutional clients are not asking their EMIs to become cryptocurrency exchanges. They are asking for faster, cheaper dollar settlement in corridors where correspondent banking is slow, expensive, or unavailable. The question for product strategy is whether refusing to serve that demand protects the institution from risk or simply redirects clients to competitors who will.
The BIS research on dollarisation waves provides the analytical anchor. If dollar dominance in international debt markets were declining, if institutional borrowers were systematically shifting to local currencies or alternative reserve currencies, then treating stablecoin settlement as a speculative novelty might be defensible. But the data shows the opposite: structural dollar preference persists, correspondent infrastructure is contracting, and institutional clients need settlement options that traditional banking increasingly cannot provide at competitive cost or speed.
The uncomfortable implication is that the fiat-only ceiling many EMIs have maintained is not neutral. It is a strategic bet against the evolution of how institutional dollar flows settle, a bet that correspondent banking will remain adequate for client needs despite clear evidence of systemic decline. That bet may prove correct in specific market segments or corridors. But product teams owe themselves and their organisations an honest accounting of what the data actually shows, rather than treating stablecoin avoidance as self-evidently prudent.
The institutions that thrive in the next phase of cross-border payments will likely be those that understood structural dollarisation as a feature of international finance, not a bug, and built settlement infrastructure accordingly.
References
[4] Visa, "Visa Launches Stablecoin Settlement in the United States," December 16, 2025
