The Bank for International Settlements (BIS) is raising fresh concerns about the growing role of stablecoins in the global financial system.
Speaking at the Federal Reserve’s Jackson Hole symposium on Aug. 28, BIS General Manager Pablo Hernández de Cos said stablecoins still cannot credibly function as a large-scale payment method. He argued that while stablecoins have gained popularity, they continue to face important challenges that limit their ability to support mainstream payments.
Instead, de Cos pointed to tokenized bank deposits as a stronger long-term solution. According to him, tokenized deposits remain connected to the traditional banking system and settle through central bank money, helping preserve trust and stability in financial transactions.
He did not call for stablecoins to be banned. Rather, he suggested that stablecoins and tokenized deposits could coexist if regulators clearly define their roles and put proper safeguards in place. In his view, tokenized deposits are better suited for everyday and large-scale payments, while stablecoins could continue serving more specialized uses, including decentralized finance.
One of the main concerns highlighted by de Cos is that stablecoins struggle to meet key characteristics expected from money. He said money should maintain a consistent value, work smoothly across different systems, and support strong financial integrity standards.
For example, stablecoins do not always trade at exactly one dollar in secondary markets. During periods of market stress, some stablecoins can trade above or below their intended value, creating friction for users and businesses.
Interoperability is another challenge. Stablecoins operate across multiple blockchains, often requiring bridges or third-party solutions to move assets between networks. These processes can introduce additional risks and complexity.
De Cos also pointed to concerns around anti-money laundering and financial crime prevention. Because public blockchains can allow users to transfer assets without traditional banking intermediaries, regulators may find it more difficult to consistently apply compliance measures.
At the same time, he acknowledged that stablecoins could bring certain benefits to the financial system. As stablecoin issuers typically hold large amounts of Treasury bills and other highly liquid assets, growing adoption could increase demand for government debt and potentially lower borrowing costs.
However, there may also be drawbacks. If consumers move significant amounts of money from bank deposits into stablecoins, banks could lose an important source of funding. That could increase funding costs and eventually affect lending to households and businesses.
The discussion comes as countries continue developing different approaches to stablecoin regulation. A recent study comparing regulations in the United States, European Union, United Kingdom, Hong Kong, and Singapore found major differences in how each jurisdiction treats stablecoin issuers and related activities.
In the United States, payment stablecoin issuers are generally required to maintain one-to-one reserves backed by cash and other approved short-term assets. Other regions allow varying levels of additional activities, subject to regulatory approval.
De Cos said regulators still face important decisions about how stablecoins should fit into the broader financial system. He also suggested that greater oversight may be needed not only for issuers themselves but also for affiliated companies operating within the same corporate groups.
Meanwhile, tokenized deposits continue to face their own challenges. Although they benefit from existing banking regulations and infrastructure, questions remain around interoperability, implementation costs, legal frameworks, and operating systems that run continuously around the clock.
The BIS is currently exploring these issues through Project Agorá, an initiative involving central banks and private financial institutions that is testing cross-border settlement using tokenized money.
For now, de Cos believes tokenized deposits offer a more reliable path for modernizing payments while maintaining the foundations of the existing monetary system. Stablecoins, he said, are likely to remain part of the financial landscape, but in more specialized roles supported by stronger regulation, transparency, and consumer protections.
