BIS head: Stablecoins not credible for payments at scale

Pablo Hernández de Cos, General Manager of the Bank for International Settlements, argued on Friday that stablecoins do not credibly function as a means of payment at scale and pointed to tokenised bank deposits as a clearer option.

Tokenised deposits are bank liabilities recorded on blockchain infrastructure. Hernández de Cos stated, ‘Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations.’ He said these deposits can retain core monetary features while enabling faster settlement and programmable payment functions.

He acknowledged stablecoins could lower government borrowing costs but warned of trade-offs. If depositors move funds from banks into stablecoins, banks could face higher funding costs and may pass those costs on to households and businesses through higher lending rates.

Technical hurdles were highlighted, including limited interoperability between stablecoin platforms and inconsistent application of anti‑money‑laundering controls.

Hernández de Cos raised policy risks from wider use of US dollar‑pegged stablecoins outside the United States, saying such use could weaken domestic monetary policy and reduce monetary sovereignty.

A study by the BIS‑linked Financial Stability Institute compared rules in the United States, the European Union, the United Kingdom, Hong Kong and Singapore. The report found the United States and Singapore take relatively restrictive approaches to non‑bank issuers, limiting activities such as lending, staking, proprietary trading and custody of third‑party crypto assets under proposed rules like the GENIUS Act. Hong Kong, the UK and the EU permit some additional activities with separate authorization or regulatory consent.

Researchers also found most restrictions apply to the issuing entity rather than the wider corporate group, allowing affiliates to undertake activities barred to the issuer. The report added that this regulatory fragmentation creates uneven incentives for where stablecoin businesses locate operations and which business models they pursue.

Regulators face choices about how tightly to limit non‑bank stablecoin issuance, how to coordinate cross‑border rules and how to address potential impacts on bank funding and domestic monetary policy.