BIS Chief Warns Stablecoins Lack Credibility for Large-Scale Payments

The Bank for International Settlements is escalating its criticism of stablecoins, with General Manager Pablo Hernández de Cos arguing that the tokens do not credibly function as a means of payment at scale. Speaking ahead of a potential bid to succeed European Central Bank President Christine Lagarde next year, de Cos told Reuters that tokenized bank deposits offer a more reliable path forward, preserving the foundations of the existing monetary system while still harnessing blockchain-based tokenization.

De Cos acknowledged one upside often cited by stablecoin advocates: the tokens could lower government borrowing costs, an argument recently echoed by US Treasury Secretary Scott Bessent. But he cautioned the effect could reverse on consumers. If customers shift bank deposits into stablecoins, banks could face higher funding costs and pass those expenses to households and businesses through increased lending rates. He also flagged limited interoperability between stablecoin platforms, inconsistent anti-money laundering enforcement, and risks to monetary sovereignty as US dollar-pegged stablecoins spread beyond American borders.

A new study from the BIS-linked Financial Stability Institute, published Thursday, underscores how fragmented the global landscape remains. The FSI compared stablecoin issuer rules across the United States, European Union, United Kingdom, Hong Kong, and Singapore, finding substantial differences in which entities may issue stablecoins and what additional business activities they can conduct. The US GENIUS Act takes a restrictive approach, generally barring payment stablecoin issuers from lending, staking, proprietary trading, and custody of third-party crypto assets. Singapore follows a similarly tight line for non-bank issuers, while Hong Kong, the UK, and EU frameworks permit additional activities with separate authorization or regulatory consent.

The contrast highlights a central tension for policymakers: governments want to capture the efficiency gains of tokenized money without destabilizing traditional banking or ceding monetary control. With major economies still drafting or finalizing stablecoin rules, de Cos's remarks signal that central bankers are unlikely to cede the payments rail to private issuers without a fight.