BIS Chief: Stablecoins Unsuitable for Large-Scale Payments…Tokenized Deposits Are the Answer — BigGo Finance

The head of the Bank for International Settlements (BIS) has pointed out that stablecoins face fundamental limitations in becoming an everyday large-scale payment mechanism, arguing that tokenized deposits—bank deposits recorded on a blockchain—offer a more realistic alternative.

Speaking at the Federal Reserve’s Economic Policy Symposium in Jackson Hole, Wyoming on the 28th (local time), BIS General Manager Pablo Hernández de Cos said, “The claim that stablecoins can function as a large-scale payment mechanism is not persuasive.” While he acknowledged that the two financial instruments can coexist, he argued that everyday payments should be handled by tokenized deposits, with stablecoins playing a complementary role in specialized areas such as cross-border transactions.

This position stands in clear contrast to the U.S. government, which views stablecoins as a means of reinforcing dollar hegemony. U.S. Treasury Secretary Scott Bessent has emphasized that dollar-based stablecoins could generate trillions of dollars in additional demand for U.S. Treasuries and solidify the dollar’s status as the world’s reserve currency. This is because stablecoin issuers purchase U.S. Treasuries as reserve assets.

De Cos did acknowledge that stablecoins could lower the U.S. government’s borrowing costs. However, he warned that if funds shift en masse from bank deposits to stablecoins, banks’ funding costs would rise, and this burden could translate into higher lending rates for households and businesses.

He also cited the erosion of the singleness of money as a problem. Converting between stablecoins issued by different entities incurs transaction costs, and interoperability between platforms has not been sufficiently secured. He further noted that customer identification and anti-money laundering standards vary by issuer and country, making consistent regulatory application difficult.

In particular, he raised concerns that the spread of dollar-pegged stablecoins could weaken the monetary sovereignty of countries outside the United States. If households and businesses in emerging economies hold large amounts of dollar stablecoins instead of their domestic currencies, the transmission channels of central bank monetary policy would be weakened, and domestic financial conditions could become more subordinated to U.S. policy direction.

“Tokenized deposits are a more direct way to harness the benefits of tokenization while preserving the foundations of the existing monetary system,” De Cos said. “However, tokenized deposits must also clarify interoperability between financial institutions and blockchains, operational entities, legal rights, and final settlement standards.”

Meanwhile, De Cos is also being mentioned as a candidate to succeed Christine Lagarde as President of the European Central Bank (ECB) when her term ends next year.