BIS Chief Warns Stablecoins Fail as Scalable Payments, Backs Tokenized Deposits
The Bank for International Settlements chief argued that tokenized deposits are superior to stablecoins for daily payments, highlighting risks to bank funding and monetary sovereignty that could reshape digital asset regulation.
Stablecoins cannot credibly function as a large-scale means of payment, according to Pablo Hernandez de Cos, general manager of the Bank for International Settlements. Speaking at the Federal Reserve’s Jackson Hole Economic Policy Symposium on August 28, he argued that tokenized deposits present a far more compelling model for daily transactions.
This assessment directly challenges the growing political momentum behind stablecoins in the United States. U.S. Treasury Secretary Scott Bessent has recently championed the assets as a digital revolution capable of cementing the dollar’s global reserve status and generating trillions in Treasury demand.
De Cos, a candidate to replace European Central Bank President Christine Lagarde next year, outlined severe structural risks if stablecoins achieve mass adoption. He warned that channeling funds away from traditional lenders could drive up bank funding costs, ultimately forcing ordinary borrowers to pay higher interest rates.
The BIS chief also noted that stablecoins fracture the "singleness" of money, forcing users to incur costs when switching between different products. Furthermore, he pointed out that current stablecoin platforms lack genuine interoperability and present persistent money-laundering vulnerabilities due to inconsistent control applications.
For international markets, the proliferation of dollar-pegged stablecoins threatens domestic monetary sovereignty. De Cos cautioned that if borrowers outside the United States accumulate these assets, it could weaken local monetary policy transmission and tightly couple domestic economic conditions to external U.S. policy stances.
While acknowledging that stablecoins might lower sovereign borrowing costs as Bessent suggested, de Cos maintained that tokenized deposits are the safer alternative. "Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations," he stated.
He conceded that tokenized deposits are not a flawless solution. The financial industry must still resolve significant interoperability, governance, and legal hurdles, particularly concerning settlement mechanisms, before they can fully replace existing infrastructure.
