The Bank for International Settlements is renewing its criticism of stablecoins, with its General Manager questioning their credibility as everyday money at a moment when governments worldwide are building regulatory frameworks around the tokens.
Tokenised Deposits the Preferred Path
BIS General Manager Pablo Hernández de Cos, who is also a candidate to succeed European Central Bank President Christine Lagarde next year, said stablecoins do not credibly function as a payment instrument at scale. He argued that tokenised bank deposits represent the stronger alternative, according to a Reuters report published on Friday.
‘Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,’ de Cos said.
Hernández de Cos acknowledged one argument made in favour of stablecoins, including one advanced by US Treasury Secretary Scott Bessent: that wider stablecoin adoption could lower government borrowing costs. He accepted the logic but warned the effect cuts both ways. If customers shift funds from bank deposits into stablecoins, banks face higher funding costs and may pass those increases on to households and businesses through higher borrowing rates.
He also flagged limited interoperability between stablecoin platforms, difficulties in consistently applying anti-money laundering controls, and the risk that growing use of US dollar-pegged stablecoins outside the United States could erode monetary sovereignty and weaken domestic monetary policy in other countries.
FSI Study Maps Regulatory Gaps Across Five Markets
Alongside the BIS commentary, the BIS-linked Financial Stability Institute published a study on Thursday comparing stablecoin issuer rules across five major markets: the United States, European Union, United Kingdom, Hong Kong, and Singapore. The study found substantial differences in which entities may issue stablecoins and what other business activities those issuers can conduct.
The US and Singapore take relatively restrictive approaches toward non-bank issuers. Under the US GENIUS Act, activities such as lending, staking, proprietary trading, and custody of third-party crypto assets generally fall outside what payment stablecoin issuers are permitted to do. Hong Kong, the UK and the EU take a less restrictive approach, allowing some additional activities subject to separate authorisation, regulatory consent, or other applicable permissions.
Across all five jurisdictions, the researchers found that restrictions apply to the issuing entity itself rather than the wider corporate group, meaning other members of the same group can conduct activities barred for the stablecoin issuer.
