BIS Chief: Stablecoins Not Fit for Payments at Scale

BIS questions stablecoins as large-scale payment rails

The Bank for International Settlements has renewed its skepticism about the ability of stablecoins to serve as reliable everyday money at scale. BIS General Manager Pablo Hernández de Cos said tokenized bank deposits present a more credible route to digital payments while preserving core monetary frameworks. Hernández de Cos, who is also a candidate to succeed European Central Bank President Christine Lagarde, made the remarks amid global regulatory debates over how to integrate stablecoins into national financial systems.

Tokenized deposits vs stablecoins

Hernández de Cos argued that tokenized bank deposits could deliver the benefits of tokenization without disrupting the foundations of the monetary system. He suggested that direct tokenization of deposits offers clearer linkages to centralised monetary frameworks and established prudential safeguards, making them a stronger option for large-scale retail payment flows.

At the same time, he acknowledged that stablecoins may influence public finances. Some advocates and officials, including US Treasury figures, have argued that stablecoins can reduce government borrowing costs. But the BIS chief warned this dynamic could also prompt a migration of deposits away from banks, raise funding costs for lenders, and ultimately lead to higher borrowing rates for households and businesses.

Compliance, interoperability and monetary sovereignty

The BIS commentary also highlighted practical frictions: limited interoperability across stablecoin platforms and uneven application of anti-money-laundering controls. Wider international use of US dollar-pegged stablecoins, he said, could erode monetary sovereignty and complicate domestic policy transmission for central banks outside the United States.

FSI study finds wide differences in issuer rules

A new study from the BIS-linked Financial Stability Institute compared regulatory approaches to stablecoin issuers across major jurisdictions, revealing substantial variation in what entities may issue stablecoins and the other activities permitted for those issuers.

Stablecoin issuer rules across major markets. Source: BIS

The FSI review looked at the United States, the European Union, the United Kingdom, Hong Kong and Singapore. It found the US and Singapore generally take more restrictive stances toward non-bank issuers. Under the proposed US GENIUS Act, for example, activities like lending, staking, proprietary trading and custody of third-party crypto assets are typically excluded from what payment stablecoin issuers may do.

By contrast, regulators in Hong Kong, the UK and the EU allow certain additional activities for stablecoin-related entities, often conditioned on separate authorization, regulatory approval or specific permissions. The FSI researchers also noted that many restrictions are applied at the issuing entity level rather than across the wider corporate group, meaning affiliates may continue other crypto-related operations even if the stablecoin issuer itself is limited.

What this means for markets

For crypto markets, the BIS critique and the FSI's comparative analysis underscore a central tension: policymakers want to capture innovation in payments while avoiding risks to financial stability, AML integrity and monetary control. Market participants and regulators will need to reconcile efficient, interoperable payment solutions with robust governance and prudential safeguards if token-based money is to scale safely.

The debate over stablecoins, tokenized deposits, and cross-border regulatory harmonisation is likely to intensify as more jurisdictions finalize frameworks and payment networks experiment with token-based rails.