BIS chief says stablecoins lack credibility for payments at scale

BIS General Manager Pablo Hernández de Cos says stablecoins do not credibly work as a means of payment at scale and argues tokenized bank deposits offer a stronger alternative. A new Financial Stability Institute study, meanwhile, finds sharp differences in how the US, EU, UK, Hong Kong and Singapore regulate stablecoin issuers.

The Bank for International Settlements is renewing its criticism of stablecoins. BIS General Manager Pablo Hernández de Cos, a candidate to succeed European Central Bank President Christine Lagarde next year, argued that stablecoins do not credibly function as a means of payment at scale, Reuters reported on Friday.

Tokenized deposits as the preferred path

Hernández de Cos said tokenized bank deposits offer a stronger alternative. According to Reuters: "a more direct path to harness tokenisation while preserving the monetary system's foundations" is how he described the approach.

He acknowledged that stablecoins could lower government borrowing costs — an argument also made by US Treasury Secretary Scott Bessent. But the effect could cut both ways for consumers, he said. If customers move bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on to households and businesses through higher borrowing rates.

Interoperability and monetary sovereignty concerns

Hernández de Cos also pointed to limited interoperability between stablecoin platforms and difficulties consistently applying anti-money laundering controls. Growing use of dollar-pegged stablecoins outside the US could undermine monetary sovereignty and weaken domestic monetary policy, he said.

Issuer rules vary sharply by market

A new FSI study published Thursday compared stablecoin regulations across the US, the European Union, the United Kingdom, Hong Kong and Singapore, finding substantial differences in which entities may issue stablecoins and what other business activities they can conduct.

The US and Singapore take relatively restrictive approaches 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 permitted for payment stablecoin issuers. Hong Kong, the UK and the EU take a less restrictive approach, allowing some additional activities with separate authorization or regulatory consent.

The researchers also found that restrictions across all five jurisdictions apply to the issuing entity rather than the wider corporate group, meaning other group members can conduct activities the stablecoin issuer itself cannot.

Sources: Reuters, BIS

Register Now

Trading involves risk.