BIS Chief Says Stablecoins Not Credible for Payments at Scale

Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos declared on August 28, 2026, that stablecoins in their current form are not a credible means of payment at scale because they fail to uphold the foundational properties of money [2]. Speaking at the Federal Reserve’s Jackson Hole Economic Policy Symposium, Hernández de Cos argued that stablecoins lack the "no-questions-asked" reliability required for a global monetary system, positioning bank-backed tokenized deposits as the superior alternative [2, 3].

The case against stablecoins

Hernández de Cos outlined a four-part failure for existing stablecoins: singleness, interoperability, elasticity, and financial integrity [3]. He specifically highlighted the "singleness" problem, noting that users often face secondary-market price deviations when converting between different stablecoins, such as USDT and USDC, because there is no mechanism to enforce par redeemability into central bank money [2].

Furthermore, the BIS chief pointed to the fragmentation of stablecoins across permissionless blockchains, which creates interoperability hurdles that do not exist in the traditional two-tier banking system [2]. He also raised concerns regarding financial integrity, noting that a majority of stablecoin balances are held in self-custodied wallets, which complicates anti-money laundering and counter-terrorist financing enforcement compared to regulated bank deposits [2].

Macro-financial risks

Beyond technical shortcomings, the BIS flagged the risk of "digital dollarization," where the widespread adoption of dollar-pegged stablecoins in smaller economies could erode local monetary sovereignty [3]. The report suggests that reserve composition for these assets can create unintended macro-financial effects, such as increasing bank funding costs or draining liquidity from central bank reserves during periods of market stress [2].

While Hernández de Cos did not call for a total ban on stablecoins, he suggested their role should be limited to specialized functions, such as decentralized lending, under robust regulatory regimes [2]. He argued that tokenized deposits—which are account-based bank liabilities settled in central bank money—are the more direct path to digitizing the monetary system because they preserve the existing two-tier architecture that already anchors trust in the global economy [2, 3].

What to watch

• Regulatory frameworks: Monitor how jurisdictions like the UK, EU, and Hong Kong adjust their stablecoin issuer rules, as these regions currently allow for varying levels of activity for corporate group members [1].
• Tokenized deposit pilots: Watch for progress in public-private initiatives like Project Agorá, which the BIS cites as early evidence for the feasibility of interoperable tokenized deposits [2].
• System-wide credit impact: Observe central bank assessments regarding how stablecoin reserve holdings—specifically demand for short-dated government bills—affect broader money market stability and bank lending capacity [2].

The central question remains whether stablecoin issuers can evolve to meet the stringent "singleness" and integrity standards required by central banks, or if the financial system will pivot entirely toward bank-issued tokenized alternatives.