BIS Chief Says Stablecoins Still Fail the Scale Test
The BIS argues that tokenized bank deposits offer a stronger monetary foundation than stablecoins for large-scale payments.
Bank for International Settlements General Manager Pablo Hernández de Cos has sharpened the institutional case against using today's stablecoins as the core of large-scale payments. His conclusion is not that tokenization lacks value. It is that the monetary liability placed on the ledger matters, and that tokenized commercial-bank deposits currently offer a more credible route to scale than privately issued coins circulating outside the banking system.
Speaking at Jackson Hole, Hernández de Cos said current stablecoins fall short on three foundations of money. The first is singleness: units that claim to represent the same currency should exchange at par. Stablecoins can diverge by issuer, reserve quality, redemption access and jurisdiction. The second is elasticity: payment systems need a mechanism for supplying liquidity when demand rises or markets come under stress. Fully reserved private tokens are designed to be inelastic. The third is integrity: a payment instrument used broadly must sit inside effective rules for anti-money-laundering controls, accountability and supervision.
Interoperability and finality add another layer of difficulty. Stablecoins exist across multiple ledgers and bridges, each with different operational risks. A transaction may look complete on one chain while the associated legal claim, redemption right or cross-chain transfer remains uncertain. At institutional scale, those ambiguities can become balance-sheet exposures rather than technical inconveniences.
The BIS preference is for tokenized deposits: digital claims on regulated banks that preserve the two-tier monetary system. Banks would continue to create deposit money and manage credit, while central banks provide the final settlement asset and liquidity backstop. Tokenization could add programmability and atomic settlement without replacing the regulatory perimeter around deposit-taking institutions.
That does not make tokenized deposits risk-free. Different banks' tokens must remain exchangeable at par, platforms need common standards and legal systems must recognize the transfer as final. Governance, privacy and cyber resilience are unresolved. A deposit token that works only inside one bank's private network would reproduce the fragmentation that distributed-ledger technology is supposed to reduce.
Hernández de Cos also highlighted macro-financial trade-offs. Large stablecoin reserve portfolios may increase demand for government bills and potentially lower sovereign borrowing costs. But if households and companies move balances out of bank deposits, banks may lose a stable source of funding. They could respond by paying more for deposits, borrowing in wholesale markets or reducing credit. Each path can raise financing costs for households and businesses.
The speed of digital transfers makes that funding risk more acute. Money can leave an issuer or a bank almost instantly, and social-media-driven runs can develop outside conventional operating hours. Reserve transparency and redemption rules help, but they do not create a lender of last resort for a private token. Nor do they guarantee that a token will remain liquid across every venue where it trades.
The speech leaves room for coexistence. Stablecoins may remain useful in crypto markets, cross-border niches and jurisdictions with weak payment infrastructure. Tokenized deposits may suit regulated wholesale and retail banking. Central-bank money can anchor both where policy allows. The debate is therefore shifting from whether stablecoins should exist to which monetary functions they can safely perform.
Why it matters
The BIS position will influence central banks and supervisors designing stablecoin, deposit-token and wholesale-settlement regimes. It favors architectures that keep commercial banks inside the money-creation process and central banks at the settlement core. That is a direct challenge to the idea that a portfolio of safe assets is sufficient to make a private coin equivalent to bank money at systemic scale.
For stablecoin issuers, the bar is rising from proof of reserves to proof of monetary integration: reliable redemption, interoperability, legal finality, financial-crime controls and a credible response to stress. For banks, tokenization offers an opportunity to modernize deposits—but only if they can build shared rails rather than incompatible branded silos. The likely future is not a single winner. It is a hierarchy in which different digital liabilities serve different markets, with public money still expected to define the unit and settle the largest risks.