The Bank for International Settlements has renewed its criticism of stablecoins, even as jurisdictions continue building rulebooks for the sector. BIS General Manager Pablo Hernández de Cos said stablecoins do not credibly work as a means of payment at scale and argued that tokenized bank deposits are a more reliable route for bringing tokenization into mainstream finance.
His comments were accompanied by a Financial Stability Institute study that compared stablecoin frameworks in the United States, European Union, United Kingdom, Hong Kong and Singapore. The review found wide differences in how major markets treat issuers, what activities they may carry out and how authorities address risks tied to banking, compliance and monetary policy.
BIS backs tokenized deposits over stablecoins
Hernández de Cos said tokenized deposits provide a more direct way to capture the benefits of tokenization without weakening the foundations of the monetary system. In the BIS view, that makes bank-linked digital money a stronger candidate than privately issued stablecoins for large-scale payment use.
The latest remarks continue a broader BIS line that questions whether stablecoins can serve as everyday money in a credible way. Rather than focusing only on the technology, the institution is framing the debate around how different forms of digital money affect the existing financial and monetary architecture.
FSI study highlights uneven regulation
The BIS-linked Financial Stability Institute found substantial variation across the five jurisdictions it examined. The study said the differences start with a basic issue: which types of entities are allowed to issue stablecoins in the first place, and what else those entities are permitted to do alongside issuance.
According to the comparison, the United States and Singapore take a relatively restrictive approach toward non-bank issuers. In the US, the GENIUS Act bars payment stablecoin issuers from activities including lending, staking, proprietary trading and custody of third-party crypto assets.
By contrast, Hong Kong, the UK and the EU allow a wider range of related activities, although those typically require separate authorization or specific permissions. The study also noted that restrictions usually apply to the issuing entity itself rather than to the wider corporate group around it.
Concerns extend beyond issuer rules
The FSI study said stablecoins may offer some benefits, including the possibility of lowering government borrowing costs. At the same time, it warned of trade-offs if customers shift funds out of traditional bank deposits and into stablecoins.
In that scenario, banks could face higher funding costs. The study said those higher costs could then be passed on to households and businesses through increased borrowing rates, linking stablecoin adoption to broader credit conditions rather than only to crypto market structure.
Cross-border use and policy risks remain in focus
The BIS-linked review also pointed to practical and policy concerns outside the issuer business model. It cited limits on interoperability between stablecoin platforms and highlighted anti-money laundering controls as continuing pressure points across jurisdictions.
Another issue flagged in the study is the growing use of US dollar-pegged stablecoins outside the United States. According to the report, that trend could erode monetary sovereignty in other countries and reduce the effectiveness of domestic monetary policy.
For now, the confirmed next step is continued regulatory development rather than a single global approach. The BIS intervention and the FSI comparison suggest that policymakers are still divided on how stablecoins should be contained, and whether tokenized deposits should play the central role instead.
Source: cointelegraph.com