The BIS considers stablecoins not very credible for large-scale payments

Stablecoins do not constitute a credible means of payment on a large scale, Pablo Hernández de Cos, head of the BIS, ruled on Friday. Before the Jackson Hole symposium on August 28, he preferred tokenized bank deposits. The day before, his institute published a study which reveals very unequal emission rules depending on the markets.

In Jackson Hole, the BIS does not believe in stablecoins as payment infrastructure

In Jackson Hole, Pablo Hernández de Cos did not hide the skepticism of the Bank for International Settlements (BIS). For its general director, stablecoins can have their usefulness, but they do not present the necessary guarantees to become the basis of large-scale payments.

The position of the BIS contrasts with that of the United States. In Washington, on the contrary, the authorities are moving towards a specific regulatory framework for stablecoins, with the idea of ​​making these assets a new instrument at the service of the American financial system.

The issue goes beyond just the crypto market. The US Treasury considers that the development of stablecoins could support demand for US bonds and, by extension, further strengthen the place of the dollar in global finance.

The BIS is banking on another solution: tokenized deposits.

“Tokenized deposits provide a more direct route to leveraging tokenization while preserving the foundations of the monetary system,” said Pablo Hernández de Cos.

The difference is important. A tokenized deposit remains a classic bank deposit, even if its circulation is based on digital infrastructure. The money therefore remains in the banking system and under the control of the existing prudential framework. A stablecoin, conversely, is typically issued by a private company and backed by reserves.

For the BRI, the two models are not necessarily incompatible. But stablecoins should not, according to her, take the place of the banking system in everyday payments.

Five markets, five regulatory approaches

This release comes the day after a study by the Financial Stability Institute (FSI), linked to the BIS. The report compares the rules applied to stablecoins in the United States, the European Union, the United Kingdom, Hong Kong and Singapore.

First observation: the rules remain very different from one market to another.

Issuance conditions, business requirements and permitted activities vary by jurisdiction. The differences are particularly visible when it comes to non-bank issuers.

The United States and Singapore have taken a relatively strict approach. The American framework notably limits certain activities for issuers of payment stablecoins, such as lending, staking – that is to say the remuneration obtained by immobilizing assets on a network – trading on own account or certain cryptocurrency custody services.

Elsewhere, regulators are more flexible. In the European Union, the United Kingdom and Hong Kong, certain additional activities may be carried out with specific authorization.

The FSI, however, notes a limitation common to several of these systems: the restrictions often target directly the company that issues the stablecoin, without necessarily covering the entire group to which it belongs.

This distinction could allow certain actors to accommodate different activities in several legal entities. The authors of the study therefore believe that monitoring at group level would be more appropriate, particularly for the largest emitters.

Banks fear a flight of their deposits

The BIS recognizes that stablecoins can bring certain benefits to the financial system. Their growth could, for example, support demand for public debt and help reduce government financing costs, an argument regularly defended by the US Treasury.

But for Pablo Hernández de Cos, the risk lies elsewhere: in the banks.

If a significant portion of deposits left banking institutions to be converted into stablecoins, banks would lose an essential source of funding. They would then have to borrow more on the markets, often under more expensive conditions.

The additional cost would, according to this logic, end up being passed on to credits granted to households and businesses.

The BIS is also concerned about the proliferation of payment ecosystems which do not always communicate with each other. Moving from one stablecoin or platform to another can still introduce costs and friction, while the application of anti-money laundering rules remains difficult to harmonize internationally.

In Europe, the ECB is continuing its digital euro project and trying to respond to concerns about surveillance.

The debate could also take on a political dimension in the coming years. Pablo Hernández de Cos is among the names mentioned for the succession of Christine Lagarde at the head of the ECB in 2027. If he were to take the direction of the institution, his very cautious vision of stablecoins could weigh more in the monetary and regulatory choices of the euro zone.