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BIS chief says stablecoins lack credibility for payments at scale

Pablo Hernández de Cos said tokenized bank deposits are a stronger alternative, and warned stablecoin adoption could raise bank funding costs.

Reported · Written up by our desk · Regulation

The Bank for International Settlements renewed its criticism of stablecoins, with BIS General Manager Pablo Hernández de Cos arguing they do not credibly function as everyday money for payments at scale, according to Cointelegraph.

In remarks highlighted by Reuters, Hernández de Cos said tokenized bank deposits offer a more direct path for tokenization while preserving the monetary system’s foundations. He also said stablecoins could potentially lower government borrowing costs, but noted the impact could cut both ways for consumers.

Hernández de Cos warned that if customers shift bank deposits into stablecoins, banks could face higher funding costs and potentially pass those expenses on through higher borrowing rates. He also pointed to limited interoperability between stablecoin platforms and challenges in consistently applying anti-money laundering controls.

Cointelegraph also noted that Hernández de Cos cited risks from growing use of US dollar-pegged stablecoins outside the US, which could undermine monetary sovereignty and weaken domestic monetary policy. A Financial Stability Institute study published Thursday compared stablecoin rules across the US, EU, UK, Hong Kong, and Singapore, finding significant differences in who may issue stablecoins and what other activities are permitted.

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