BIS Questions Stablecoins' Viability as Payment System

The Bank for International Settlements (BIS) is questioning the reliability of stablecoins as a large-scale payment system. According to BIS General Manager Pablo Hernandez de Cos, tokenized deposits could provide a stronger foundation for bringing blockchain technology into everyday finance.

Stablecoins are crypto assets designed to maintain a stable value by being pegged to a currency like the U.S. dollar. Their growing adoption has attracted support from some U.S. officials while raising concerns among regulators over financial stability, money laundering, and potential effects on traditional banking.

Hernandez de Cos argued that stablecoins have several weaknesses, including the loss of 'singleness' in money, which means customers may face costs when moving between different stablecoin products.

The BIS official also highlighted a potential problem for countries outside the United States. Most major stablecoins are dollar-linked, which could weaken monetary sovereignty and make domestic monetary policy less effective.