BIS Chief Says Stablecoins Are Not a Credible Payment Tool at Scale

Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos said stablecoins are unlikely to become a credible means of payment at scale, arguing that tokenized bank deposits could provide a more effective foundation for bringing tokenization into everyday transactions.

The comments were reported in information shared on X by @WuBlockchain, citing Reuters. Speaking at the Jackson Hole Economic Policy Symposium, de Cos said stablecoins and tokenized deposits could coexist but should serve different functions within the financial system. He suggested that tokenized deposits should support most routine payments, while stablecoins could be used for more specialized applications.

BIS Raises Concerns Over Stablecoin Adoption

Stablecoins are digital assets generally designed to maintain a stable value against a reference asset, such as the U.S. dollar. Their use has expanded across cryptocurrency markets and in some jurisdictions, prompting financial authorities to examine their potential effects on banking systems and monetary policy.

De Cos highlighted several limitations that could constrain the ability of stablecoins to operate as a large-scale payment mechanism. Among them are limited interoperability between different systems and challenges associated with consistently applying anti-money laundering controls.

These issues could become more significant as stablecoins expand beyond cryptocurrency-related transactions and are increasingly used for payments. Ensuring that different payment networks can communicate effectively while maintaining consistent regulatory standards remains a key challenge for digital forms of money.

The BIS official also warned that greater adoption of dollar-pegged stablecoins in certain jurisdictions could affect monetary sovereignty. Widespread use of foreign-currency stablecoins may reduce the role of domestic currencies in payments and potentially weaken the effectiveness of domestic monetary policy.

Tokenized Deposits Offer an Alternative

De Cos presented tokenized deposits as a more compelling approach to applying tokenization to the financial system. Unlike stablecoins issued outside the traditional deposit framework, tokenized deposits represent bank deposits in a digital, programmable form.

Under the model outlined by de Cos, tokenized deposits could be used for ordinary payments while stablecoins remain available for more specialized purposes. The two forms of digital money would therefore not necessarily compete directly but could operate alongside one another.

However, tokenized deposits also face obstacles before they can be deployed broadly. De Cos identified interoperability, governance and legal issues as areas that need to be addressed.

Interoperability is particularly important because a payment system involving multiple banks and financial platforms requires the underlying networks to work together. Governance and legal frameworks would markets also need to establish how tokenized deposits are issued, transferred and regulated.

Stablecoins Could Affect Bank Funding Costs

De Cos also pointed to potential consequences for the banking sector if consumers and businesses move significant amounts of money from traditional bank deposits into stablecoins.

Stablecoin issuers may increase demand for U.S. Treasuries as they hold reserve assets to support dollar-pegged tokens. De Cos said this could potentially reduce government borrowing costs by creating additional demand for Treasury securities.

At the same time, the movement of funds away from bank deposits could increase funding costs for financial institutions. Banks could face higher borrowing costs if they lose a portion of their traditional deposit base, potentially affecting borrowing rates paid by ordinary customers.

The comments reflect the broader debate among central banks and financial institutions over how tokenization should develop without undermining existing monetary and banking systems. While digital assets can introduce new forms of payment and financial infrastructure, policymakers continue to assess their implications for regulation, financial stability and monetary policy.

Writer: Victoria Hale
Technology & Blockchain Writer

Victoria Hale writes about blockchain technology, digital infrastructure, and the intersection of emerging technologies with finance. Her articles explore how new protocols and systems are shaping the evolving digital economy.

She prioritises clarity and accuracy when explaining technical developments to a general audience.