Stablecoins Lack Payment Credibility, BIS Says Tokenized Deposits Preferred

Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos told the Jackson Hole symposium that stablecoins do not yet function as a credible payment method at scale. He highlighted tokenized bank deposits – digital representations of commercial‑bank balances settled in central‑bank money – as a preferable route for everyday and wholesale transactions.

Why Stablecoins Fall Short

De Cos evaluated stablecoins against three monetary‑system characteristics:

• Singleness: Different forms of the same currency should be interchangeable at par. In secondary markets, tokens such as USDT and USDC can trade above or below one dollar, breaking this parity.
• Interoperability: Stablecoins operate on multiple blockchains and often require bridges or wrapped assets, adding operational and custody risk.
• Financial integrity: Public blockchains enable self‑custody, making anti‑money‑laundering and counter‑terrorist‑financing controls harder to enforce.

Tokenized Deposits as an Alternative

Tokenized deposits remain liabilities of regulated banks and settle through central‑bank accounts, preserving the link to sovereign money. While they also face interoperability challenges, they benefit from existing banking supervision, capital and liquidity frameworks.

Regulatory Landscape

A Financial Stability Institute study compared stablecoin rules in the United States, European Union, United Kingdom, Hong Kong and Singapore. All jurisdictions limit issuers to issuance, redemption and reserve management, but they differ on activities such as lending, staking, proprietary trading and custody. The U.S. GENIUS Act, for example, requires one‑for‑one reserves of cash or short‑term Treasury securities and restricts non‑reserve activities.

Economic Implications

Stablecoin growth could increase demand for short‑term government debt, potentially lowering borrowing costs for the Treasury. However, a shift of deposits from banks to stablecoins may raise banks’ funding costs, especially for smaller lenders, and could create contagion risks if large redemptions force issuers to sell Treasury securities.

Future Outlook

The BIS is exploring tokenized‑deposit solutions through Project Agorá, involving multiple central banks and private institutions. While tokenized deposits show promise, practical barriers such as network effects, liquidity management outside normal banking hours, and legal questions around settlement finality remain to be addressed.