Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos has formally declared that stablecoins lack sufficient credibility to serve as large-scale payment instruments. Viewed as a potential successor to ECB President Christine Lagarde next year, de Cos instead proposed tokenized bank deposits as a safer alternative.
In his view, the transition to distributed ledger technology must not dismantle the established banking order. “Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos stated, explaining the BIS’s current position.
The BIS acknowledged that stablecoin circulation has its own appeal, including the potential to lower government borrowing costs - an argument also echoed by US Treasury Secretary Scott Bessent. However, this shift brings a double-edged consequence. If depositors transfer their funds from traditional bank deposits into stablecoins, commercial banks could ultimately be forced to raise lending rates for households and businesses.
Technical Hurdles and Sovereignty Threats
Beyond economic risks, de Cos highlighted technical shortcomings in current stablecoin infrastructure. BIS analysis concluded that interoperability between platforms remains highly limited. A fragmented industry ecosystem also makes the consistent enforcement of anti-money laundering (AML) compliance difficult across disparate networks.
Cross-border macroeconomic implications were also included in their warning. The BIS expressed concern that the rapid spread of US dollar-pegged stablecoins outside the United States could gradually undermine the monetary sovereignty of other nations.
Regulatory Loopholes Across Five Financial Hubs
The sharp critique from the BIS coincided with the release of a regulatory study by its affiliate, the Financial Stability Institute (FSI). The institute examined the regulatory status of stablecoins across the United States, the European Union, the United Kingdom, Hong Kong, and Singapore, revealing significant regulatory gaps among the five jurisdictions.
Authorities in the United States and Singapore have adopted the strictest approach to limiting non-bank stablecoin issuers. For instance, under the GENIUS Act framework in the United States, lending, staking, proprietary trading, and third-party crypto custody activities are completely prohibited for payment stablecoin issuers. In contrast, the United Kingdom, Hong Kong, and the European Union apply significantly more lenient standards.
Interestingly, regulatory frameworks across all five global financial hubs share a common workaround. All operational restrictions apply only to the specific entity acting as the stablecoin issuer, rather than its parent corporate umbrella. This legal loophole ensures that sister entities within the same corporate group remain free to engage in the prohibited activities. Reported via Cointelegraph.
Read also: What Is DeFi (Decentralized Finance)?
Read also: Dozens of Banking Giants Build Global Stablecoin Network - While JPMorgan Takes a Different Path
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
