The Bank for International Settlements pushed back on stablecoins as a mass payment tool on Aug 29. General Manager Pablo Hernández de Cos said stablecoins currently do not have the credibility needed to function as a large-scale payment instrument. Tokenized bank deposits, in his view, are a more promising path because they can take advantage of blockchain technology while keeping the existing monetary system's foundations intact. Hernández de Cos acknowledged stablecoins could reduce government financing costs. But he warned that a large migration of bank deposits into stablecoins would raise bank funding costs, and that burden would likely be passed to households and companies through higher lending rates. He also pointed to limited interoperability among stablecoin networks, inconsistent enforcement of anti-money-laundering rules, and overseas expansion of dollar stablecoins as sources of financial-stability and monetary-sovereignty risk. The BIS's Financial Stability Institute found notable regulatory differences among the US, EU, UK, Hong Kong and Singapore. The US and Singapore restrict non-bank stablecoin issuers more heavily; the US GENIUS Act in principle prohibits payment stablecoin issuers from lending, staking, proprietary trading and third-party crypto custody. Hong Kong, the UK and the EU allow some of these activities with extra authorization.
The Bank for International Settlements has pushed back on stablecoins as a payment instrument. General Manager Pablo Hernández de Cos said on Aug 29 that stablecoins do not yet have the credibility needed to serve as a large-scale means of payment. He argued that tokenized bank deposits are a more likely path to combine blockchain technology with the foundations of the existing monetary system.
Bank funding costs at stake
Stablecoins could cut government funding costs, Hernández de Cos acknowledged. But the trade-off cuts the other way too. If a large share of bank deposits flow into stablecoins, banks would face higher funding costs, and households and businesses would eventually pay for it through higher lending rates.
He also flagged several structural weaknesses: limited interoperability between stablecoin systems, the difficulty of enforcing anti-money-laundering rules uniformly, and the growing use of dollar stablecoins outside the US. Those factors, he said, could create risks for financial stability and monetary sovereignty.
Divergent rules in five jurisdictions
New research from BIS's Financial Stability Institute points to clear regulatory differences across the US, EU, UK, Hong Kong and Singapore. The US and Singapore take a relatively strict line on non-bank issuers. In the US, the GENIUS Act in principle prevents payment stablecoin issuers from engaging in lending, staking, proprietary trading and third-party custody of crypto assets. Hong Kong, the UK and the EU allow some related businesses, provided the issuer secures additional authorization or regulatory approval.
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