The BIS has written off stablecoins: they are not suitable as money
The Bank for International Settlements (BIS) in its latest annual report has issued a harsh verdict on modern stablecoins: they are incapable of performing the key functions of money. According to the organization's analysts, these assets do not provide either direct or indirect settlements on central bank balance sheets, making them essentially unsuitable for the role of a universal means of payment.
The main problem lies in the lack of a guarantee of exchange at par between the issuer and various blockchains under any market conditions. The friction that arises during redemption makes stablecoins more akin to exchange-traded funds (ETFs) than to full-fledged money. Furthermore, the open blockchains on which they operate suffer from fragmentation between L1 and L2 networks: the same stablecoin in different protocols ceases to be fungible.
Risks associated with pseudonymity and non-custodial wallets are highlighted separately, creating serious problems for compliance with KYC and AML/CFT requirements. The opacity of governance and the blurred responsibility of issuers only exacerbate the situation.
As of the end of May, the market capitalization of stablecoins reached $320 billion. The BIS warns: if the spread of these assets continues, it could lead to higher funding costs for banks and a reduction in lending to the real economy. Of particular concern is the so-called "stablecoin dollarization" — the growing demand for dollar-denominated stablecoins in countries with weak currencies threatens to increase the volatility of cross-border capital flows and undermine monetary sovereignty.
As an alternative, the BIS proposes developing a legal tokenization infrastructure, which, in their view, could provide the necessary level of reliability and control.
Expert commentary: The BIS's position is not new — regulators have consistently pointed out the structural shortcomings of stablecoins. However, the market ignores these warnings, preferring to focus on short-term returns. Until issuers solve the problem of cross-chain interoperability and provide a real redemption guarantee, stablecoins will remain more of a speculative instrument than a new generation of money.