The Bank for International Settlements is questioning whether stablecoins can function credibly as everyday money as governments develop regulatory frameworks around the tokens.
BIS General Manager Pablo Hernández de Cos stated that stablecoins do not credibly function as a means of payment at scale, according to Reuters. He argued that tokenized bank deposits offer a more direct path to harness tokenization while preserving the monetary system's foundations.
Potential Economic Tradeoffs
Hernández de Cos acknowledged that stablecoins could lower government borrowing costs. However, he warned of unintended consequences: if customers move bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on to households and businesses through higher borrowing rates.
He also raised concerns about limited interoperability between stablecoin platforms, difficulties in consistently applying anti-money laundering controls, and potential risks from widespread use of US dollar-pegged stablecoins outside the US, which could undermine monetary sovereignty and weaken domestic monetary policy.
Regulatory Divergence Across Markets
A study from the BIS-linked Financial Stability Institute published on Thursday compared stablecoin regulations across the US, European Union, United Kingdom, Hong Kong, and Singapore, finding substantial differences in regulatory approaches.
The US and Singapore take relatively restrictive approaches toward non-bank issuers. Under the US GENIUS Act, lending, staking, proprietary trading, and custody of third-party crypto assets generally fall outside permitted activities for payment stablecoin issuers.
Hong Kong, the UK, and the EU permit some additional activities with separate authorization, regulatory consent, or other applicable permissions. Across all five jurisdictions, restrictions apply to the issuing entity rather than the wider corporate group, meaning other group members can conduct activities that the stablecoin issuer itself cannot.
