BIS Questions Stablecoins' Credibility as Everyday Money

The Bank for International Settlements (BIS) is once again questioning the credibility of stablecoins as everyday money. BIS General Manager Pablo Hernández de Cos, who is a candidate to succeed European Central Bank President Christine Lagarde next year, argued that stablecoins do not credibly function as a means of payment at scale.

According to Reuters, de Cos said that tokenized bank deposits offer a stronger alternative to stablecoins. He emphasized that tokenized deposits provide a more direct path to harnessing tokenization while preserving the monetary system's foundations.

The comments come as regulators worldwide grapple with stablecoin adoption and build regulatory frameworks around the tokens. A new study from the BIS-linked Financial Stability Institute (FSI) shows significant differences in how major markets regulate stablecoin issuers.

Hernández de Cos acknowledged that stablecoins could lower government borrowing costs, an argument also made by US Treasury Secretary Scott Bessent. However, he noted that this effect could cut both ways for consumers. If customers move bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on to households and businesses through higher borrowing rates.

Furthermore, the BIS General Manager pointed out limited interoperability between stablecoin platforms and difficulties consistently applying anti-money laundering controls. He also expressed concerns that growing use of US dollar-pegged stablecoins outside the US could undermine monetary sovereignty and weaken domestic monetary policy.