Stablecoins do not credibly function as a means of payment at scale, Bank for International Settlements General Manager Pablo Hernandez de Cos said on Friday, endorsing tokenized bank deposits as a more viable application of tokenization technology.
Speaking at the U.S. Federal Reserve's annual Jackson Hole Economic Policy Symposium in Wyoming, de Cos acknowledged that both instruments could coexist, with tokenized deposits handling the bulk of day-to-day transactions and stablecoins serving specialized roles. Tokenized deposits, he argued, offer a more direct path to harness blockchain while preserving the monetary system's foundations, though they still face hurdles in interoperability, governance, legal frameworks and settlement efficiency.
De Cos' remarks contrasted with U.S. Treasury Secretary Scott Bessent's support for stablecoins, which Bessent has framed as a digital revolution that could reinforce the dollar's dominance as the world's top reserve currency and drive demand for trillions of dollars in U.S. Treasuries. The BIS chief, however, highlighted several structural risks posed by stablecoins, including higher bank funding costs as deposits migrate away from lenders, which could push borrowing rates higher for ordinary customers.
He also criticized stablecoins for breaking the "singleness" of money by requiring users to buy and sell between products, and for lacking genuine interoperability across platforms. Money-laundering risks were cited as another concern, given the difficulty of applying consistent controls. Most significantly, de Cos warned that the growing adoption of dollar-pegged stablecoins could erode monetary sovereignty in jurisdictions outside the U.S., fostering digital dollarization that weakens domestic monetary policy transmission and ties local economic conditions to external policy decisions.
The BIS chief's comments come amid broader discussions at Jackson Hole about the future of digital finance and the role of central bank digital currencies, with de Cos positioning tokenized deposits as a more credible alternative to privately issued stablecoins for mainstream payment adoption.
