Bank for International Settlements: stablecoins lack credibility in large-scale payments

President of the Bank for International Settlements: stablecoins do not have the credibility of large-scale payments

On August 28, President of the Bank for International Settlements Pablo Hernandez de Coos said at the Jackson Hole seminar that stablecoins are not a credible means of large-scale payments. He prefers tokenize bank deposits. The day before, a study released by the agency pointed out that there were significant differences in the issuance rules of stablecoins among markets.

Brief summary

Pablo Hernandez de Coos, General Manager of the Bank for International Settlements, pointed out in Jackson Hole on August 28 that stablecoins lack credibility as a means of large-scale payments.

Financial Stability Institute research report

Research released by the Financial Stability Institute on August 27 shows that there are huge differences in the issuance frameworks of stablecoin the United States, the European Union, the United Kingdom, Hong Kong and Singapore.

Jackson Hole Conference: The Bank for International Settlements does not recognize stablecoins as payment infrastructure

At the Jackson Hole Conference, Pablo Hernandez de Coos made no secret of the Bank's skepticism. The bank's president believes that although stablecoins have their uses, they do not demonstrate the necessary guarantees needed to become the basis for large-scale payments.

The position of the Bank for International Settlements contrasts with that of the United States. U.S. authorities are promoting a dedicated regulatory framework for stablecoins in an attempt to build them into a new tool to serve the U.S. financial system. This problem actually transcends the cryptocurrency market itself. The U.S. Treasury Department believes that the development of stablecoins may support demand for U.S. Treasury bonds, thereby further consolidating the U.S. dollar's position in global finance.

The Bank for International Settlements is betting on another solution: tokenized deposits. "Tokenized deposits provide a more direct way to leverage tokenization technology while maintaining the foundation of the monetary system," Pablo Hernandez de Cos said. There are significant differences between the two: tokenized deposits are still traditional bank deposits, except that their circulation relies on digital infrastructure, and funds remain in the banking system and are regulated by existing prudential frameworks; while stablecoins are usually issued by private companies and backed by reserve assets.

The Bank for International Settlements believes that the two models are not necessarily mutually exclusive, but stablecoins should not replace the role of the banking system in daily payments.

Five major markets, five regulatory paths

This statement was released the day after a research report by the Financial Stability Institute of the Bank for International Settlements. The report compares regulatory rules on stablecoins in the United States, the European Union, the United Kingdom, Hong Kong and Singapore. The primary finding is that the rules of each market vary greatly. Issuance conditions, requirements placed on companies, and permitted activities vary from jurisdiction to jurisdiction, especially for non-bank issuers.

The United States and Singapore have adopted relatively strict practices. The U.S. framework restricts certain activities of payment stablecoin issuers, such as loans, pledges (that is, obtaining income by locking in assets), proprietary trading, and some cryptocurrency custody services. Regulators in the European Union, the United Kingdom and Hong Kong appear to be more flexible, and certain additional activities can be carried out after obtaining specific authorizations.

However, the Financial Stability Institute notes that multiple systems have a common limitation: restrictions often target the company issuing stablecoins directly, but do not necessarily cover the group as a whole. This distinction may allow some participants to arrange different activities through multiple legal entities. The authors of the study believe that group-level regulation is more appropriate, especially for large issuers.

Banks worry about loss of deposits

The Bank for International Settlements acknowledges that stablecoins may bring certain benefits to the financial system. For example, its growth could support demand for public debt and help reduce national financing costs-a view often advocated by the U.S. Treasury. But Pablo Hernandez de Cos believes that the risk lies with banks: if a large amount of deposits flow out of banking institutions and converted into stablecoins, banks will lose important sources of funding and have to borrow from the market at a higher cost. Following this logic, the additional costs will eventually be passed on to loans to households and businesses.

The Bank for International Settlements is also concerned about the lack of communication between multiple payment ecosystems. Switching between different stablecoins or platforms still creates costs and frictions, and anti-money laundering rules are difficult to unify and coordinate at the international level. In Europe, the European Central Bank continues to advance the digital euro project and attempts to address privacy concerns.

This debate may take on political overtones in the coming years. Pablo Hernandez de Cos has been listed as one of the potential candidates to succeed Christine Lagarde as ECB president in 2027. If he runs the agency, an extremely cautious attitude towards stablecoins could have a greater impact on monetary and regulatory choices in the eurozone.