BIS says stablecoins threaten global monetary system

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Eugene Komchuk

7 hours ago

BIS says stablecoins threaten global monetary system — BIS opposes stablecoins.

The Bank for International Settlements (BIS) warned that the rapid growth of the stablecoin market could fragment the global monetary system and weaken states’ control over monetary policy. Regulators and the financial sector should accelerate the development of tokenized forms of central bank and commercial bank money as a safer alternative to private digital tokens.

In its annual report, the Basel-based organization assessed the stablecoin market, which is worth around $316 billion. According to BIS, tokens pegged to fiat currencies do not have the institutional features needed to function as reliable money at scale.

BIS pointed to structural vulnerabilities related to reserve asset management. The organization also warned that a significant shift of funds from commercial bank deposits into private digital tokens could weaken bank funding and restrict lending to the real economy.

The report served as a signal to policymakers that the current regulation of stablecoins may prove insufficient if private digital currencies continue to grow rapidly. BIS does not view stablecoins as a sustainable foundation for the future monetary system. Instead, the organization sees tokenized commercial bank deposits combined with tokenized central bank money operating on regulated infrastructure as a more reliable path.

The report pays special attention to “stablecoin dollarization,” the growing use of dollar-denominated stablecoins in countries with weaker national currencies. According to BIS, this trend could undermine monetary sovereignty, reduce the effectiveness of domestic monetary policy, weaken bank intermediation and increase dependence on volatile cross-border capital flows. Emerging markets remain particularly vulnerable to these risks.

BIS opposes blockchains

The report also contains one of BIS’s strongest criticisms of public blockchains such as Bitcoin and Ethereum as a potential foundation for the monetary system. The organization believes that decentralized networks with distributed validation and no single governance center cannot fully meet the requirements for scalability, legal accountability and settlement finality that apply to systemically important financial infrastructure.

BIS’s key objection concerns the economics of decentralized consensus. The report says public permissionless blockchains reward validators through fees that rise as network activity increases. As a result, congestion, longer transaction confirmation times and higher costs are not temporary technical failures, but structural features of such systems.

According to BIS, these characteristics undermine the efficiency and network effects needed for a unified monetary system. In addition, permissionless blockchains lack the clear governance and accountability mechanisms required for institutional finance.

The organization notes that such networks do not have an identifiable entity responsible for maintaining the integrity of the system, resolving disputes and ensuring compliance with financial transparency standards. Because of this, public blockchains face serious limitations in trying to become the basis for large-scale regulated financial activity.

At the same time, BIS does not reject the idea of tokenization itself. The organization proposes a “unified ledger” model in which tokenized central bank money, tokenized commercial bank deposits and tokenized financial assets operate on programmable platforms within a regulated legal and institutional environment.

According to BIS, this approach would preserve the benefits of tokenization, including programmable transactions and faster settlement, while avoiding damage to the institutional foundation of the existing monetary system. This could improve the efficiency of financial markets without harming monetary stability, financial transparency or public trust.

Why BIS criticizes cryptocurrencies

This position fits into BIS’s broader approach to cryptocurrencies. The organization has been skeptical of them for many years, especially when Bitcoin, stablecoins or DeFi are presented as a replacement for the traditional monetary system. In previous reports, BIS has already argued that cryptocurrencies promise to replace trust in central and commercial banks with trust in decentralized networks, but in practice they face problems related to scalability, volatility, network congestion and legal uncertainty.

The reason for this criticism is linked to BIS’s own role. The organization effectively serves as a coordination platform for central banks, so it views money primarily through the lens of financial stability, monetary sovereignty, control over payments and the resilience of the banking system. From this perspective, cryptocurrencies and private stablecoins look not like a neutral innovation, but like a potential source of fragmentation: they can move payments and savings outside the regulated banking system, weaken the effectiveness of monetary policy and create new channels of cross-border risk.

As a reminder, BIS previously actively praised Project Agorá.

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