The Bank for International Settlements has warned that dollar stablecoins such as USDT and USDC should not be treated like cash. Speaking at a seminar in Tokyo, BIS General Manager Pablo Hernández de Cos said their current design is closer to an ETF, and that distinction matters if redemptions surge during a period of market stress.
His point was direct: if dollar-backed stablecoins keep expanding until they become large enough to rival traditional money, the result could carry material consequences for both financial stability and monetary policy. The remarks add to a broader regulatory push now taking shape across Europe.
Why the BIS compares stablecoins to ETFs
The BIS argument rests on three structural features. First, redemption in the primary market often comes with fees or conditions, which means holders cannot always exchange tokens for dollars as freely as withdrawing bank money at par. Second, prices in secondary markets can drift away from $1. Third, reserves are commonly invested in short-dated government debt and bank deposits, giving stablecoins a profile that resembles money market funds more than sovereign currency.
In that framework, stablecoins may become a source of fragility in stressed conditions rather than a stabilizing instrument. Fast cross-border transfers and smart contract compatibility do not, by themselves, make them suitable for broad-based payments.
How redemption pressure could reach banks
The transmission channel described by the BIS is straightforward. If fear hits the market and users rush to redeem, issuers may need to liquidate reserve assets, including short-term US Treasuries and bank deposits. Selling into an already strained market could push prices lower, while large withdrawals from bank deposits could tighten liquidity inside the banking system.
Hernández de Cos said the mechanism is not fundamentally different from the logic seen in the 2023 Silicon Valley Bank run. The difference is where the stress begins: this time, the trigger would come from on-chain stablecoin redemptions.
Public blockchains and AML blind spots
The BIS also highlighted anti-money laundering concerns tied to public permissionless blockchains and non-custodial wallets. In its view, much of the activity involving these stablecoins takes place outside the conventional AML/CTF perimeter, with meaningful controls concentrated mainly at fiat on-ramps and off-ramps.
That leaves a gap. If users can move funds on-chain without touching regulated exchanges, authorities may struggle to keep up with transaction flows. The BIS said special safeguards at on/off-ramps are needed if those channels are to be monitored effectively.
Europe is moving from observation to control
The BIS warning lines up with a tougher tone from European officials. Earlier this month, Banque de France First Deputy Governor Denis Beau called on the EU to go beyond MiCA, arguing for tighter limits on the use of non-euro stablecoins in everyday payments and stricter rules for issuing the same token inside and outside the bloc.
The European Central Bank has also drawn comparisons between euro stablecoins and tokenized money market funds, saying both perform liquidity transformation and face run risk, even though they operate under very different standards for transparency, liquidity management, and supervision. In the UK, lawmakers questioned Coinbase in the House of Lords in March over whether stablecoins could drain commercial bank deposits, trigger a run similar to Silicon Valley Bank, or be used for crime.
Switzerland is testing a regulated model
Switzerland has taken a different route. On April 8, UBS and several domestic peers launched a Swiss franc stablecoin pilot in a sandbox setting, keeping issuance tied to regulated financial institutions while testing blockchain-based payments. It is one of the clearest examples so far of a stablecoin experiment operating close to an officially accepted structure.
Taken together, the BIS speech and the positions emerging from France, the ECB, the UK, and Switzerland show that the debate is shifting from broad caution to concrete policy design. The BIS message was that global coordination matters, because fragmented national rules create openings for regulatory arbitrage.