Stablecoins not a credible means of payment at scale, BIS chief says
FILE PHOTO: Bank of Spain Governor Pablo Hernandez de Cos, speaks during the HKMA-BIS High-Level Conference in Hong Kong, China November 28, 2023. REUTERS/Tyrone Siu/File Photo
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JACKSON HOLE, Wyoming, Aug 28 : Stablecoins do not credibly function as a means of payment at scale and tokenized deposits offer a more compelling case to harness the benefits of this new technology, said the chief of the Bank for International Settlements, a central bank umbrella group.
Stablecoins are a type of crypto asset designed to maintain a stable value. Their growing popularity has fuelled concerns about financial stability and money laundering among key officials, particularly outside the United States.
However, U.S. Treasury Secretary Scott Bessent has supported stablecoins, calling them a digital revolution that could help cement the dollar’s position as the world’s top reserve currency and create demand for trillions of dollars’ worth of Treasuries.
Addressing the U.S. Federal Reserve’s Jackson Hole Economic Policy Symposium in Wyoming, Pablo Hernandez de Cos, general manager of the BIS, said the two instruments could coexist. But he argued that tokenized deposits should account for the bulk of day‑to‑day payments and stablecoins should serve more specialised roles.
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De Cos, a candidate to replace European Central Bank President Christine Lagarde next year, listed a slew of issues with stablecoins.
He said they could indeed lower sovereign borrowing costs, as Bessent has argued. But bank funding costs could rise as funds are channelled away from lenders and ordinary borrowers may end up paying higher rates, de Cos said.
Stablecoins also break the “singleness” of money since customers cannot jump between products without selling and buying at a cost, he said.
Stablecoin platforms are also not genuinely interoperable and they raise money-laundering questions since controls are difficult to apply consistently, de Cos said.
“The growing adoption of dollar-pegged stablecoins has also raised concerns in some jurisdictions about monetary sovereignty and the potential for digital dollarization,” he said.
If ordinary borrowers outside the U.S. pile into dollar-based stablecoins, such a move could erode monetary sovereignty, weaken domestic monetary policy transmission and tie local conditions more closely to external policy stances, de Cos said.
“Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos said.
Still, even tokenized deposits need to solve issues about interoperability, governance and legal hurdles, including on settlement, he said.
Source: Reuters
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