BIS chief says stablecoins lack credibility for large-scale payments
BIS chief Pablo Hernández de Cos told the Jackson Hole symposium that stablecoins fail on par redeemability, interoperability, and integrity controls, pushing tokenized deposits as the safer alternative for payments.
Pablo Hernández de Cos used his Jackson Hole speech to argue that stablecoins fail basic tests of money and that bank-backed tokenized deposits are the safer path forward.
The General Manager of the Bank for International Settlements delivered the critique during the Federal Reserve's Jackson Hole Economic Policy Symposium on August 28. His recommendation: tokenized deposits, not stablecoins, should handle the bulk of everyday payments.
De Cos laid out specific attributes that stablecoins currently fail to deliver: par redeemability, elasticity, interoperability, and financial integrity. He said stablecoins cannot guarantee a clean one-to-one exchange back to fiat on demand, do not flex well across different blockchain ecosystems, and fall short on compliance controls.
He contrasted stablecoins with tokenized deposits, which are structured as bank liabilities settled in central bank money. Tokenized deposits better adhere to the core principles of the monetary system because they digitize what already works rather than replacing it with something untested at scale, de Cos argued.
Beyond the technical shortcomings, de Cos flagged a geopolitical concern: digital dollarization. As US dollar-denominated stablecoins spread globally, they could erode monetary sovereignty in smaller economies. Countries that already struggle to maintain independent monetary policy could find their citizens defaulting to dollar-pegged stablecoins for daily transactions, effectively outsourcing their monetary system to a private issuer pegged to another nation's currency.
He also pointed to increased costs for banks as a risk. If deposits migrate from traditional bank accounts into stablecoins, banks lose a cheap source of funding, which could tighten credit conditions and raise borrowing costs.
De Cos referenced Wyoming's Frontier Stable Token, known as FRNT, as an example of public-sector experimentation with digital assets. He emphasized the need for careful and incremental experimentation rather than full-throttle adoption.
For stablecoin issuers, the path de Cos outlined is clear but demanding. He acknowledged that stablecoins could become relevant if they undergo significant changes to enhance redeemability, cross-chain interoperability, and integrity controls.
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