Tether CEO Defends Fully Reserved Stablecoins Against BIS Preference for Tokenized Deposits

Tether CEO Paolo Ardoino has publicly challenged the Bank for International Settlements (BIS) stance that favors tokenized bank deposits over stablecoins. Ardoino contends that fully reserved stablecoins, which hold reserves in highly liquid assets, provide a stronger safeguard for savers compared with fractional‑reserve banking.

Key Points of the Debate

The BIS, represented by General Manager Pablo Hernández de Cos, highlighted several concerns about stablecoins, including redeemability at par, interoperability, financial‑integrity risks, and potential impacts on monetary sovereignty. In contrast, Ardino emphasized the reserve composition of stablecoins, noting that they can be backed almost entirely by liquid U.S. government securities.

Reserve Structure vs. Fractional Reserve Banking

• Stablecoins such as USDT can hold reserves in U.S. Treasuries, providing high liquidity.
• Commercial banks operate under fractional reserve systems, keeping only a portion of liabilities in liquid form.
• Ardino questions why savers would choose fractional‑reserve products when fully reserved stablecoins are available.

Interoperability and Settlement Concerns

• Tokenized deposits remain liabilities of commercial banks and settle through central‑bank accounts, preserving a “singleness” of money.
• Stablecoins may require exchanges between different tokens (e.g., USDT to USDC) and rely on cross‑chain bridges, creating price deviations and AML/CFT enforcement challenges.

Industry Responses and Ongoing Projects

Major banks are developing tokenized‑deposit infrastructure. JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo plan a shared deposit‑token network via The Clearing House, targeting a 2027 launch. SWIFT has also piloted a blockchain ledger for tokenized deposits with 17 banks.

Some institutions, such as Custodia Bank and Vantage Bank, are testing hybrid models that function as bank deposits within a private network and as stablecoins when transferred externally, with a rollout expected in late 2026.

Regulatory and Policy Implications

The debate has reached U.S. lawmakers. Banking groups have urged tighter restrictions on stablecoin reward programs, fearing deposit flight that could reduce bank lending capacity. The Digital Asset Market Clarity Act and related proposals (e.g., the GENIUS Act) are under discussion, with divergent views on how to limit interest‑bearing incentives on stablecoins.

Hernández de Cos also noted that stablecoin demand for Treasury securities could affect sovereign borrowing costs, while large outflows from bank deposits might raise banks’ funding costs and, ultimately, borrowing costs for households and businesses.

Market Context

USDT remains the largest stablecoin by circulation, with significant usage in regions where access to U.S. dollars or traditional banking is limited. Tether has expanded into cross‑border payments, including a May investment in the LemFi platform serving African and Asian remittance corridors.