BIS Chief Slams Stablecoins as Unscalable, Backs Tokenized Bank Deposits

Bank for International Settlements General Manager Pablo Hernández de Cos has publicly questioned whether stablecoins can credibly function as everyday payment instruments at scale, reigniting a long-running debate over the role of dollar-pegged tokens in the global financial system. Speaking ahead of the BIS's annual economic report, de Cos — who is also a leading candidate to succeed European Central Bank President Christine Lagarde in 2026 — argued that tokenized bank deposits offer a more viable path forward for payment innovation without destabilizing the monetary system. "Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system's foundations," he said, according to Reuters.

De Cos acknowledged that stablecoins could reduce government borrowing costs — a point echoed recently by US Treasury Secretary Scott Bessent — but warned that the benefits may come at a steep price for consumers. If households and businesses shift bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on through elevated lending rates, he said. He also flagged limited interoperability between stablecoin platforms and inconsistent anti-money laundering controls as structural weaknesses, while cautioning that growing use of US dollar-pegged stablecoins outside the United States could erode monetary sovereignty in foreign jurisdictions.

The comments arrived alongside a new study from the BIS-linked Financial Stability Institute comparing stablecoin issuer rules across the United States, European Union, United Kingdom, Hong Kong, and Singapore. The FSI found substantial divergence in which entities may issue stablecoins and what ancillary business activities — such as lending, staking, proprietary trading, and third-party custody — they can conduct. Under the US GENIUS Act, payment stablecoin issuers face tight restrictions on those activities, while Hong Kong, the UK, and the EU permit additional operations subject to separate authorization or regulatory consent. The findings underscore the patchwork regulatory landscape confronting issuers as governments race to formalize oversight of the fast-growing sector.