Key Takeaways:
The Bank for International Settlements has shifted its stance on stablecoin payments, warning that dollar-pegged tokens could erode monetary control in jurisdictions where they circulate.
The BIS warned that dollar-pegged stablecoins risk undermining monetary sovereignty outside the United States, as USD-based tokens control more than 90 percent of the roughly $1.13 trillion stablecoin market. Pablo Hernández de Cos, general manager of the Bank for International Settlements, said on the sidelines of the Jackson Hole symposium that widespread adoption of dollar stablecoins would weaken domestic monetary policy in most countries.
"Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system's foundations," de Cos said, arguing that bank-issued alternatives carry less sovereign risk than stablecoins issued by private firms.
USD stablecoins led by Tether's USDT and Circle's USDC dominate more than 90 percent of market supply, according to the BIS. Stablecoin transaction volumes fell 37 percent this summer, dropping from $1.8 trillion at the end of June to $1.13 trillion in August. Bolivia is considering making USDT local tender, while Tether's token is already widely used across South American markets where local currencies have collapsed.
The BIS highlighted a regulatory gap between banks and non-bank stablecoin issuers. Current rules center on issuance, redemption, and reserve management, with banks receiving more flexibility because they already operate under prudential supervision. Non-bank issuers could face tighter limits on lending, staking, and custody — activities that add financial risk beyond the stablecoin itself.
Regulators also flagged a loophole: a non-bank issuer could place restricted activities inside an affiliated company rather than conduct them through the issuing entity. That has drawn attention to group-wide supervision, allowing regulators to assess risk across affiliated businesses rather than only the issuing firm.
De Cos identified interoperability as a key obstacle to everyday payments, saying stablecoins can undermine the "singleness" of money because users cannot always move between products without selling one asset and buying another. Anti-money-laundering controls remain difficult to apply consistently across systems, he added.
The BIS position does not rule out a future role for stablecoins, which de Cos said could become more relevant if issuers improve redeemability, cross-chain interoperability, and integrity controls. But the institution vouched for tokenized deposits as the safer path, with JPMorgan already testing the format and the European Central Bank pushing for central bank money to go on-chain, according to a Bloomberg report.
U.S. Treasury Secretary Scott Bessent has argued that stablecoins could strengthen the dollar's international position while creating trillions of dollars in additional Treasury demand. De Cos acknowledged that increased Treasury purchases could reduce sovereign borrowing costs, but warned the same shift could raise bank funding costs if customers move deposits into stablecoins, tightening lending conditions and raising borrowing costs for households and businesses.
Austin Campbell, adjunct professor at Columbia Business School, echoed the sovereignty concern, saying USD stablecoins will destroy more than 50 percent of currencies within 30 years. De Cos cited Wyoming's Frontier Stable Token, or FRNT, as an example of public-sector experimentation with digital assets while emphasizing gradual experimentation.
The warning could accelerate regulatory scrutiny of non-bank issuers across major markets and push banks toward tokenized deposits, though it remains to be seen whether bank-issued alternatives can rival the entrenched USD stablecoins that already dominate global supply.
This article is for informational purposes only and does not constitute investment advice.
