Tether CEO Paolo Ardoino has pushed back against criticism from the Bank for International Settlements (BIS), pointing directly to the weaknesses of traditional banking. Responding to the BIS presentation at the Jackson Hole Economic Symposium on August 28, 2026, he contrasted fully backed stablecoins with a banking system holding only a fraction of liquid assets.
“The BIS is right to be worried that stablecoins expose the emperor with no clothes,” Ardoino stated. He questioned why anyone would choose a fractional-reserve product when they could use a fully backed stablecoin. USDT is currently supported by liquid assets, including US government bonds, while commercial banks hold only a fraction of customer liabilities in liquid form.
The critique followed remarks by BIS General Manager Pablo Hernández de Cos, who argued that stablecoins do not yet meet the requirements for large-scale payment tools. De Cos noted that crypto assets still face issues regarding redeemability, interoperability, and financial integrity. The BIS favors tokenized bank deposits because they remain liabilities of commercial banks and settle via central bank accounts to preserve the singleness of money.
Interoperability Challenges vs Deposit Flight Risks
The BIS highlighted recurring technical hurdles in the market. A USDT user paying a USDC recipient must first convert assets on secondary markets, where exchange rates risk depegging from target values during periods of market stress.
However, the banking sector faces pressure from another front. US banking groups are currently pressing lawmakers regarding stablecoin yield rules under the draft CLARITY Act. Citigroup CEO Jane Fraser warned that stablecoin yields could drain deposits from conventional bank accounts, potentially curbing credit capacity and lending capabilities of community banks.
Major Banks Accelerate Proprietary Token Development
Recognizing the risk of deposit flight, major financial institutions are building new infrastructure. A consortium comprising JPMorgan, Bank of America, Citigroup, and Wells Fargo is developing a shared deposit token network through The Clearing House, targeting a launch in the first half of 2027.
Globally, similar initiatives are already underway. In July 2026, the SWIFT network launched a shared blockchain-based ledger with 17 major banks, including Citi, HSBC, UBS, and BNP Paribas. The system is designed to process 24/7 cross-border payments using tokenized deposits.
Hybrid models are also undergoing trials. Custodia Bank and Vantage Bank are testing dual-function tokens that function as deposits within the Hazel network and convert into stablecoins externally, with a targeted rollout in Q4 2026.
While central and commercial banks rely on state-backed infrastructure, stablecoin issuers offer the guarantee of full reserves. For consumers and market participants, this technical debate comes down to a simple choice: which system is more trustworthy in preserving liquidity during a crisis. Source: crypto.news.
Read also: What Is DeFi (Decentralized Finance)?
Read also: BIS Chief Rules Out Stablecoins as Large-Scale Payment Tools - Household Borrowing Costs at Stake
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.
