Stablecoins lack credibility for payments at scale, BIS chief says
BIS chief de Cos questions stablecoins' credibility as tokenized deposits offer alternative. FSI study finds major regulatory differences across five jurisdictions on issuer rules and permitted activities.
The Bank for International Settlements is escalating its critique of stablecoins, with its top official arguing the tokens cannot credibly function as everyday money even as governments build licensing regimes around them.
BIS General Manager Pablo Hernández de Cos, a candidate to succeed European Central Bank President Christine Lagarde next year, said stablecoins do not work as a means of payment at scale. Tokenized bank deposits offer a stronger path forward, he told reporters on Friday, according to Reuters.
“Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos said.
The remarks land as regulators in the US, European Union, UK, Hong Kong and Singapore finalise stablecoin rules. A new study from the BIS-linked Financial Stability Institute, published Thursday, found sharp divergence across those five markets in which entities may issue stablecoins and what other business activities are permitted.
The US and Singapore take the most restrictive approach toward non-bank issuers. Under the US GENIUS Act, lending, staking, proprietary trading and custody of third-party crypto assets generally fall outside the activities allowed for payment stablecoin issuers. Hong Kong, the UK and the EU allow some additional activities with separate authorisation or regulatory consent.
Restrictions in all five jurisdictions apply to the issuing entity rather than the wider corporate group, the FSI researchers found, meaning group affiliates can conduct activities the stablecoin issuer itself cannot.
De Cos acknowledged that stablecoins could lower government borrowing costs, an argument Treasury Secretary Scott Bessent has also made. But, he cautioned, the effect could cut both ways. If customers shift bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on to households and businesses through higher borrowing rates, de Cos said.
He also pointed to limited interoperability between stablecoin platforms and difficulties applying anti-money laundering controls consistently. Growing use of US dollar-pegged stablecoins outside the US could undermine monetary sovereignty and weaken domestic monetary policy, he said.
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