BIS urges global rules as dollar stablecoins threaten banks

Pablo Hernández de Cos, general manager of the Bank for International Settlements, warned Monday at a Bank of Japan seminar in Tokyo that large U.S. dollar stablecoins such as USDT and USDC could have “material consequences” for financial stability if they grow large enough to rival traditional money.

Hernández de Cos said current stablecoin arrangements “fall short of what is needed for a widely used means of payment.” He pointed to fees and conditions on primary-market redemptions and episodes when stablecoin prices have diverged from their pegs in secondary markets as evidence that these tokens do not operate like cash.

The BIS official described how many large dollar stablecoins resemble exchange-traded funds because issuers hold reserve assets such as short-term government debt and bank deposits. In a stress event, rapid outflows could force sales of those reserves into already strained markets or pass funding pressure to banks, creating run and contagion risks and complicating monetary and economic policy.

He raised anti-money-laundering and counter-terrorism-financing concerns, noting that public, permissionless blockchains and unhosted wallets leave a substantial share of activity outside conventional controls. Stablecoins could be attractive for illicit use unless specific safeguards are added at on- and off-ramps.

European officials are tightening rules. Bank of France First Deputy Governor Denis Beau has urged the European Union to limit the use of non-euro stablecoins in everyday payments and to tighten rules on issuing the same token inside and outside the bloc to reduce regulatory arbitrage in stressed conditions. At a crypto conference in Paris on April 17, French Finance Minister Roland Lescure urged European banks to launch euro stablecoins by 2026 and scale up tokenized deposits.

Other jurisdictions are weighing similar issues. Members of the U.K. House of Lords questioned Coinbase in March about whether stablecoins could drain commercial bank deposits, trigger runs similar to the Silicon Valley Bank collapse and facilitate criminal activity as the British government prepares a dedicated regulatory framework for fiat-backed tokens. In Switzerland, UBS and other banks launched a franc-denominated stablecoin pilot on April 8 inside a regulatory sandbox to test blockchain payments while keeping the instruments anchored in the regulated financial system.

Policy deliberations are ongoing as stablecoins grow in use. Hernández de Cos called for stronger cross-border coordination so rules and oversight can keep pace with tokenized, money-like instruments.