BIS chief warns stablecoins lack credibility as payment method

The general manager of the Bank for International Settlements (BIS) has dismissed stablecoins as an unreliable foundation for large-scale payments, advocating instead for tokenized bank deposits as a more robust alternative.

Speaking at the Jackson Hole Economic Policy Symposium in Wyoming, Pablo Hernandez de Cos stated that stablecoins do not function credibly as a payment method at scale, emphasizing that tokenized deposits should handle most daily transactions. Stablecoins, designed to maintain a stable value relative to fiat currencies, have expanded rapidly but raised concerns over financial stability, money laundering risks, and threats to monetary sovereignty through digital dollarization—particularly outside the United States.

U.S. Treasury Secretary Scott Bessent has taken a contrasting view, describing stablecoins as a digital revolution that could reinforce the dollar’s dominance as the world’s primary reserve currency and drive demand for trillions of dollars in U.S. Treasuries. De Cos acknowledged that stablecoins may reduce sovereign borrowing costs, as Bessent has argued, but cautioned they could also raise bank funding expenses by diverting deposits away from traditional lenders. This shift, he warned, could ultimately push up borrowing costs for households and businesses.

The BIS chief highlighted structural flaws in stablecoin ecosystems, noting that they disrupt the "singleness" of money by imposing conversion costs when users switch between products. He also pointed to the absence of genuine interoperability among stablecoin platforms, which undermines their utility for seamless transactions. Tokenized deposits, by contrast, operate within the existing banking framework and preserve the integrity of the monetary system, according to de Cos.

While tokenized deposits present a more direct path to leveraging blockchain-based tokenization, de Cos stressed that they must overcome hurdles around interoperability, governance, legal barriers, and settlement processes before achieving widespread adoption.