Washington just voted on stablecoins. But the bigger vote already happened, phone by phone, from Lagos to Buenos Aires.

On Tuesday the US Senate blocked the Clarity Act with 49 votes against 50. After two years of fighting over who regulates crypto and whether dollar stablecoins may pay interest. The fight was about American banks. Eventhough, the larger impact of the digital dollar is not in the US. It is abroad.

Anyone who has waited weeks for a bank to clear a payment out of Lagos or Buenos Aires understands the request. The same amount moves in Tether in forty seconds, phone to phone, with no form and no queue. Nigeria's central bank cut banks off from crypto in 2021; usage kept growing and the ban was gone by 2023. When Argentina's official exchange rate stopped meaning anything, Argentines started to price the dollar in Tether.

About 310 billion dollars of stablecoins are in circulation now. A majority not in the United States. The Bank for International Settlements measured the consequence in July. Across 130 economies, restrictions on foreign currency deposits cut dollarisation by around 30 percentage points. Stablecoin transactions were "largely unaffected by either broad or specific capital flow restrictions" and banking crises only pulled them in even faster. That means, the one tool emerging markets kept for a crisis stops working the moment a crisis hits.

Does capital market openness inevitably end in crisis for emerging markets? The question assumes openness is a choice. Two decades ago, Joshua Aizenman wrote that trade makes capital controls leak, so it was never a question of if, only when and how. The when just arrived on a phone screen.

Crises usually come from a peg, dollar debt and empty reserves, like we saw in 1997. Countries that abandoned it, handled this year just fine: the rupiah fell to a record low in May, Bank Indonesia raised rates, and nothing broke. In 1998 the same currency lost four fifths of its value and took a government down.

So the answer is not simply stronger capital controls. First, stop spending reserves and credibility on rules a teenager with a wallet app can bypass. Second, license the exchanges where pesos become Tether, collect the data there, and charge a small fee, like Chile did on inflows in the 1990s. Third, do what Brazil and Indonesia did after 1998: borrow in your own currency, let the exchange rate move, and hold reserves you did not borrow from the IMF.

America has obligations here too. Kristalina Georgieva said at Jackson Hole last month that countires with currencies that back stablecoins have a particular responsibility for what those coins do abroad. On Tuesday the Senate showed how much Washington cares.

Yes, 310 billion dollars seem small next to four trillion of portfolio money that entered into emerging markets since 2008. It doesn't need a majority to start a run, just enough people that are heading for the same exit in the same time. And yes, China banned it, but only a few governments have China's tools. None of the heavily exposed ones do.

With US rates at 4 per cent and the ten year Treasury above 5, every depositor from Lagos to Buenos Aires can hold the safest asset in the world. On their phone, in their pocket. The exit is in the app store. Governments should stop imposing more and more regulation and make sure the guidelines work when people start using the system in their daily life.