BIS chief says stablecoins lack credibility for payments at scale

BIS General Manager Pablo Hernández de Cos said stablecoins do not credibly function as a means of payment at scale. He said tokenized bank deposits offer a more direct way to use tokenization while preserving the foundations of the monetary system. Hernández de Cos is a candidate to succeed European Central Bank President Christine Lagarde next year. He acknowledged that stablecoins could lower government borrowing costs. US Treasury Secretary Scott Bessent has also made that argument. Hernández de Cos said customers moving bank deposits into stablecoins could raise banks' funding costs. He said banks could pass those costs to households and businesses through higher borrowing rates. He also cited limited interoperability between stablecoin platforms. He cited difficulties in applying anti-money laundering controls consistently. He said wider use of US dollar-pegged stablecoins outside the United States could undermine monetary sovereignty and weaken domestic monetary policy. A Financial Stability Institute study published on Thursday compared stablecoin regulations in the United States, the European Union, the United Kingdom, Hong Kong and Singapore. The study found substantial differences in which entities can issue stablecoins. It also found differences in the other business activities issuers can conduct. The United States and Singapore take relatively restrictive approaches toward non-bank issuers. Under the US GENIUS Act, payment stablecoin issuers generally cannot conduct lending, staking, proprietary trading or custody of third-party crypto assets. Hong Kong, the United Kingdom and the European Union allow some additional activities with separate authorization, regulatory consent or other applicable permissions. The study found that restrictions in all five jurisdictions apply to the issuing entity rather than the wider corporate group. Other group members can therefore conduct activities that the stablecoin issuer itself cannot.