BIS warns $320B stablecoin market risks fragmentation

Pablo Hernández de Cos, general manager of the Bank for International Settlements, warned in Tokyo on April 20 that the $320 billion stablecoin market faces risks of regulatory fragmentation and potential financial instability and urged coordinated global rules.

He outlined structural risks to credit markets, monetary policy and financial integrity, saying stablecoins lack two characteristics of functional money: singleness and interoperability. Transactions do not settle on central bank balance sheets, and tokens move across multiple public blockchains.

The BIS chief said the market totaled about $320 billion on April 20, 2026, and contrasted that figure with roughly $8 trillion in U.S. bank deposits. He noted Tether’s USDT and Circle’s USDC together account for an estimated 85% to 98% of supply and that about 98% of stablecoins are pegged to the U.S. dollar.

De Cos cited data showing stablecoin transaction volumes reached about $35 trillion in 2025, while payment flows tied to real‑economy use were roughly $390 billion that year, a small share of activity in conventional payment systems.

He warned that fragmentation across blockchains compounds interoperability problems. The same stablecoin operating on networks such as Ethereum and Solana can face settlement frictions and wider price deviations under stress.

Financial integrity was a central concern. Stablecoins circulating on permissionless networks and in unhosted wallets often fall outside current regulatory perimeters and lack know‑your‑customer checks, limiting anti‑money‑laundering and counter‑terrorist financing measures. Chainalysis data cited by the BIS indicated stablecoins account for most illicit transactions identified within the crypto ecosystem.

On monetary policy, de Cos said dollar‑pegged stablecoins are functioning as a parallel store of value in some emerging market and developing economies. He warned broader adoption may weaken domestic monetary transmission, increase volatility in capital flows and enable evasion of capital controls.

He pointed to Japan’s 2022 amendments to its Payment Services Act as an early example of domestic regulation, but noted yen‑pegged stablecoins represent less than 0.01% of the market capitalization of dollar‑pegged coins.

The BIS chief highlighted the BIS Unified Ledger vision and Project Agorá, a collaboration with the Bank of Japan testing tokenization for cross‑border payments. He urged policymakers to refine frameworks using Project Agorá’s findings with a view to integration by 2026.

He closed by saying “the monetary anchor provided by central banks remains indispensable,” and reiterated that central bank involvement is necessary regardless of how stablecoin arrangements evolve.