Crypto28 August, 20263 min read
BIS General Manager Pablo Hernandez de Cos Says Stablecoins Lack Credibility for Payments at Scale
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Stablecoins do not credibly function as a means of payment at scale. Tokenized deposits are presented as a more compelling alternative for scale payments.
BIS pushes tokenized deposits
Bank for International Settlements General Manager Pablo Hernandez de Cos said stablecoins do not credibly function as a means of payment at scale, while tokenized deposits offer a more compelling path to harness tokenisation into the financial system. Speaking at the Federal Reserve’s Jackson Hole Economic Policy Symposium in Wyoming on August 28, de Cos said the two instruments could coexist but that tokenized deposits should account for the bulk of day-to-day payments and stablecoins should serve more specialised roles. Reuters reported that de Cos argued stablecoins are crypto assets designed to maintain a stable value, usually by being pegged to a fiat currency such as the U.S. dollar, but he said they face weaknesses that could make them difficult to use as a universal payment instrument.
De Cos also warned that stablecoins could contribute to digital dollarization in emerging markets, making it harder for governments to manage monetary policy and control cross-border capital flows, and he said local banks could lose part of their funding base. He said tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations, while still needing to address interoperability, governance and legal issues, particularly around settlement.
Interoperability and AML gaps
De Cos said stablecoins break the “singleness” of money because customers cannot jump between products without selling and buying at a cost, and he argued stablecoin platforms are not genuinely interoperable. Reuters reported that he also raised money-laundering controls as a challenge, saying controls are difficult to apply consistently across stablecoin platforms and raising questions about how effectively systems can operate across jurisdictions. In the same Jackson Hole remarks, de Cos warned that the growing adoption of dollar-pegged stablecoins has raised concerns in some jurisdictions about monetary sovereignty and the potential for digital dollarization.
He said if ordinary borrowers outside the U.S. pile into dollar-based stablecoins, such a move could erode monetary sovereignty, weaken domestic monetary policy transmission and tie local conditions more closely to external policy stances. Reuters also reported that de Cos acknowledged stablecoins could lower sovereign borrowing costs, but he said bank funding costs could rise as funds are channelled away from lenders and ordinary borrowers may end up paying higher rates.
Rules differ across markets
Alongside his critique of stablecoins as “money in practice,” de Cos pointed to a BIS-linked Financial Stability Institute study that found major differences across jurisdictions in who can issue stablecoins and what related activities are allowed. Reuters reported that the FSI study compared stablecoin regulation in the United States, European Union, United Kingdom, Hong Kong and Singapore, and said the US and Singapore take relatively restrictive approaches toward non-bank issuers. Under the US GENIUS Act framework, Reuters said lending, staking, proprietary trading and custody of third-party crypto assets generally fall outside permitted activities for payment stablecoin issuers.
The Reuters report said Hong Kong, the UK and the EU allow some additional activities with separate authorisation, regulatory consent or other applicable permissions, but it also found that restrictions across all five jurisdictions apply to the issuing entity rather than the wider corporate group. In the same Reuters account, de Cos said tokenised deposits still need to solve issues about interoperability, governance and legal hurdles, including on settlement, as regulators assess whether tokenized deposits can preserve the existing banking and monetary framework.