BIS Warns Stablecoins Pose Risks to Financial Stability and Monetary Independence

The Bank for International Settlements (BIS) has cast doubt on stablecoins as a reliable alternative to traditional currency, sparking renewed scrutiny of the sector. BIS General Manager Pablo Hernández de Cos argued that tokenized bank deposits are better suited to connect blockchain technology with conventional banking infrastructure.

De Cos pointed out that widespread adoption of stablecoins could drive up consumer borrowing expenses if deposits shift from banks to digital coins, leading to increased funding costs for traditional banks. He also expressed concerns about the lack of connectivity among stablecoin platforms and the challenges governments face with anti-money laundering oversight.

The BIS has been working closely with policymakers in leading economies to design and implement regulatory frameworks around stablecoins. A recent research report from the Financial Stability Institute (FSI), an entity affiliated with BIS, highlights significant differences in rules affecting both the issuance of stablecoins and the permissible business activities of related firms.

The US and Singapore maintain relatively strict regulations for non-bank stablecoin issuers, while regulatory regimes in Hong Kong, the UK, and the EU are more flexible. Companies in these jurisdictions may engage in additional activities, provided they obtain approval from the relevant authorities.