The Bank for International Settlements (BIS) is advocating tighter international coordination on stablecoins, warning that USD-denominated tokens could pose material risks to financial stability and economic policy if their scale rivals traditional money. The BIS perspective emerged from remarks by General Manager Pablo Hernández de Cos at a Bank of Japan seminar in Tokyo, where he stressed that current stablecoin arrangements do not yet meet the standards required for widespread everyday payments, despite offering potential benefits such as faster cross-border transfers and deepened smart-contract integration.
De Cos highlighted the largest USD-backed stablecoins, including USDT and USDC, as illustrative cases. He argued that these tokens exhibit features closer to investment products than cash-like money, citing fee structures, redemption constraints on primary markets, and episodes where prices deviate from par in secondary trading. In the BIS view, such dynamics give stablecoins ETF-like characteristics and introduce run and contagion risks because issuers typically hold reserves composed of short-term government debt and bank deposits. In a stress scenario, rapid outflows could force the sale of these reserves into constrained markets or transmit funding pressures to the banking system.
The BIS warnings come amid a broader regulatory dialogue on how to manage fast-growing stablecoins and other tokenized forms of money. De Cos also noted that activity on public, permissionless blockchains and with unhosted wallets sits largely outside conventional Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) controls, raising concerns that stablecoins could be misused without tailored safeguards at on- and off-ramps.
Key takeaways
- The BIS urges international coordination to mitigate stability risks from large USD-backed stablecoins, arguing they could affect monetary policy and financial stability if they gain substantial scale.
- USDT and USDC are described as sharing characteristics with investment products rather than cash-like money, due to redemption features, fees, and price dislocations from par.
- Reserve assets backing stablecoins—primarily short-term government debt and bank deposits—may become a source of systemic risk through rapid outflows and forced asset sales in stressed markets.
- Regulators emphasize that much stablecoin activity operates outside traditional AML/CTF oversight, underscoring the need for bespoke safeguards at exchange gateways and wallet interfaces.
- Regulatory responses are being observed globally, with Europe, the UK, and Switzerland pursuing tighter controls or pilot programs to assess how stablecoins fit within existing financial frameworks.
Global regulatory momentum and Europe’s tightening stance
The BIS remarks sit within a wider policy debate about how to regulate stablecoins and other tokenized money. In Europe, policymakers are actively considering tighter controls on non-euro stablecoins and related instruments, beyond the current Markets in Crypto-Assets Regulation (MiCA). Earlier reports noted that Bank of France officials have urged the European Union to curb non-euro-denominated stablecoins used in everyday payments and to tighten restrictions on issuing the same coin inside and outside the bloc to reduce regulatory arbitrage during periods of stress.
The European Central Bank (ECB) has also contrasted euro-stablecoins with tokenized money market funds, pointing out that while both enable liquidity transformation and carry run risk, they differ in transparency, liquidity management, and regulatory oversight. Those differences could influence how stress propagates through funding markets and how institutions manage associated risk—information that is central to policy design and supervisory expectations.
Cross-border policy dynamics: UK and Switzerland as case studies
In the United Kingdom, lawmakers examined the stability implications of stablecoins as part of a bespoke regime under development for fiat-backed tokens. During a parliamentary inquiry, questions were raised about whether stablecoins could drain commercial bank deposits, trigger runs akin to those seen in some private banks, or facilitate illicit activity, underscoring the need for robust regulatory guardrails in a market that remains highly interconnected with traditional finance.
Switzerland’s approach illustrates a different regulatory trajectory. UBS and several domestic banks launched a franc-denominated stablecoin pilot in a sandbox environment on the heels of broader efforts to explore blockchain-enabled franc payments while anchoring the instrument in a tightly regulated financial system. The initiative signals an emphasis on practical testing within a controlled regulatory perimeter, balancing innovation with risk management and compliance standards.
These developments reflect a broader policy trend: as stablecoins scale, policymakers are seeking coherence across jurisdictions to address cross-border issues, supervisory alignment, and consumer protection—all within the framework of MiCA, existing banking regulation, and AML/CTF regimes. The overlaps among market structure, liquidity transformation, and regulatory oversight are increasingly central to institutional planning and compliance strategies for banks, exchanges, and other financial market participants.
Closing perspective
As policymakers weigh the proper balance between fostering innovation and safeguarding financial stability, the key question is how to design safeguards that are effective across borders, assets, and chains. The coming months are likely to bring further policy consultations and potential revisions to cross-border rules, as authorities seek to close gaps in oversight while preserving the efficiency and resilience benefits that tokenized money can offer.
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