BIS Chief Questions Stablecoin Viability as Global Payment System, FSI Study Reveals Regulatory Fragmentation

Questions Over Stablecoin Credibility

Leadership at the Bank for International Settlements has cast doubt on whether stablecoins can serve as a dependable foundation for large-scale payments, marking another chapter in central banking skepticism toward the emerging asset class. According to BIS General Manager Pablo Hernández de Cos, as reported by Reuters, stablecoins fall short of the criteria needed to function credibly as everyday money despite growing adoption worldwide.

Instead of stablecoins, de Cos advocated for tokenized bank deposits as a more suitable path forward, arguing they provide a way to leverage blockchain technology while maintaining the integrity of traditional monetary systems. His position comes as regulators across the globe work to establish comprehensive frameworks governing how stablecoins operate within their jurisdictions.

Banks at Risk, Monetary Policy Under Pressure

While de Cos acknowledged that stablecoins could theoretically reduce government borrowing costs—a benefit previously highlighted by US Treasury Secretary Scott Bessent—he warned of potential downsides for financial institutions and households. If consumers shift deposits from traditional banks into stablecoins, lenders could face higher funding costs, ultimately passed along to borrowers through increased lending rates.

The executive also emphasized concerns about consistency in applying anti-money laundering safeguards across the stablecoin ecosystem, pointing to limitations in how different platforms communicate and share information. Perhaps most significantly, he cautioned that the proliferation of US dollar-linked stablecoins in markets outside America could erode monetary sovereignty and complicate the implementation of domestic monetary policy.

Regulatory Landscape Remains Fragmented

A companion study from the BIS-affiliated Financial Stability Institute released this week underscores why de Cos’s concerns resonate among policymakers. The research examined how five major financial hubs—the United States, European Union, United Kingdom, Hong Kong, and Singapore—regulate entities issuing stablecoins, finding stark divergence in their approaches.

The United States and Singapore maintain relatively strict standards, generally prohibiting stablecoin issuers from engaging in lending, staking arrangements, proprietary trading, or holding customer cryptocurrency assets. By contrast, authorities in Hong Kong, the United Kingdom, and the European Union permit these activities under certain conditions, either with separate authorization or regulatory approval. Notably, across all examined jurisdictions, regulatory requirements focus on the issuing entity itself rather than broader corporate structures, potentially allowing affiliated companies within a group to conduct prohibited activities.

This regulatory patchwork raises practical challenges for stablecoin projects seeking to operate globally, as they must navigate incompatible requirements while consumers face varying levels of protection depending on geography and issuer choice. As governments formalize their stablecoin policies, the need for greater international coordination appears increasingly urgent.

Central bank scrutiny of stablecoins could accelerate adoption of tokenized assets that operate under banking supervision, presenting both challenges and opportunities for blockchain development in the payments space.

Source: BIS, via Cointelegraph. Not financial advice.