Global: BIS Raises Concerns Over Stablecoin Structural Risks

The Bank for International Settlements (BIS) has raised fresh concerns about the structural weaknesses of stablecoins, warning that despite their rapid adoption, current designs may pose significant risks to financial stability, monetary sovereignty, and trust in the global financial system.

Stablecoins have seen accelerated adoption in recent years, driven largely by growing institutional interest and supportive regulatory developments in key markets, particularly the United States. Increased policy backing for dollar-pegged stablecoins has further strengthened their position in global digital payments and cross-border transactions.

However, concerns about their long-term viability and systemic impact continue to intensify among regulators and central banks.

BIS Flags Key Weaknesses in Stablecoin Design

In its latest annual economic report, the BIS argued that existing stablecoin models fall short of meeting key monetary standards required to sustain trust in money.

A major issue identified by the institution is the challenge of maintaining singleness — the principle that different forms of money should be redeemable at par with central bank money without friction or uncertainty.

According to the BIS, many stablecoins do not consistently guarantee this level of redeemability, creating potential risks for users and financial institutions.

The report further noted that stablecoins operating on public, permissionless blockchain networks face additional design-related limitations affecting interoperability, redeemability, and resilience.

These concerns are becoming increasingly relevant as regulators strengthen regulatory compliance, financial compliance, and risk assessment frameworks around digital asset markets.

The BIS also warned that weaknesses in stablecoin architecture could create vulnerabilities linked to anti-money laundering, financial crime prevention, and broader regulatory monitoring.

Financial Stability Risks Could Grow

Although stablecoins may contribute to payment innovation and improve transaction efficiency, the BIS cautioned that widespread adoption could significantly alter traditional banking structures.

The institution warned that growing reliance on stablecoins could disrupt bank funding models, affect credit creation, and introduce new financial stability risks.

According to the report, increased stablecoin adoption could reduce traditional bank deposits, potentially limiting banks’ capacity to extend credit to businesses and households.

The BIS added that the global dominance of dollar-denominated stablecoins may create additional macroeconomic concerns, especially for emerging economies.

Countries with weaker economic fundamentals could experience more volatile capital flows and greater pressure on domestic monetary systems.

This trend could also undermine regulatory risk management and weaken monetary policy effectiveness, particularly in jurisdictions seeking to preserve economic sovereignty.

Stablecoins Raise Sovereignty Concerns for Emerging Markets

The BIS highlighted that high global demand for dollar-backed stablecoins could reinforce dollarisation in economies where local currencies already face trust challenges.

For developing and frontier markets, this presents growing concerns around monetary independence and strategic control over domestic payment infrastructure.

These concerns mirror broader debates within the RegTech industry, where regulators increasingly focus on balancing digital innovation with stronger regulatory frameworks and compliance monitoring tools.

The conversation has also gained traction among central banks exploring digital currency alternatives and tokenised financial infrastructure.

BIS Promotes Unified Ledger as Alternative

As an alternative to current stablecoin models, the BIS proposed the development of a unified ledger—a shared infrastructure capable of integrating multiple forms of tokenised money within a single coordinated system.

According to the institution, such an approach could help preserve trust in money while unlocking the efficiency benefits of tokenisation and digital finance.

The BIS cited Project Agorá, a public-private initiative involving eight central banks and more than 40 regulated financial institutions, as a practical example of this model.

The project explores how tokenised commercial bank deposits and central bank reserves can operate across interconnected ledgers to improve wholesale cross-border payments.

By integrating tokenisation into existing financial infrastructure, the BIS believes financial authorities can encourage innovation while maintaining stability and public trust.

Pablo Hernández de Cos, General Manager of the BIS, stressed that the future of digital money must be shaped through coordinated policy action.

“By integrating digital innovation such as tokenisation into the existing financial architecture, authorities can shape the future of money, the economy and the financial system in the public interest while preserving trust,” he said.

He added that achieving this vision will require stronger domestic and international collaboration, improved regulatory intelligence, and coordinated global governance frameworks.

As stablecoins continue to gain mainstream attention, the BIS warning reinforces a growing consensus among regulators: digital asset innovation must evolve alongside robust oversight, resilient infrastructure, and effective compliance systems.