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BIS chief: Stablecoins not credible for large-scale payments

Created at 28 Aug · 5:00 PM1 source↑ Market-relevant
IN SHORT

Pablo Hernandez de Cos, head of the Bank for International Settlements, stated that stablecoins are not a credible means of payment at scale, arguing that tokenized deposits offer a more compelling case for harnessing new technology in daily transactions. He cited concerns over financial stability, money laundering, and monetary sovereignty.

Key Numbers

twoinstruments could coexist

Who's Involved

Pablo Hernandez de Cos
General Manager of the Bank for International Settlements
Scott Bessent
U.S. Treasury Secretary
Bank for International Settlements
central bank umbrella group

↳ Why This Matters

The head of a key international financial institution has cast doubt on the viability of stablecoins for widespread payment use, favoring tokenized deposits. This perspective could influence regulatory approaches and the future development of digital currencies.

Key facts

  • Stablecoins are not a credible means of payment at scale, according to BIS General Manager Pablo Hernandez de Cos.
  • Tokenized deposits offer a more compelling case for harnessing new technology in daily payments, de Cos said.
  • Concerns were raised about stablecoins' potential impact on financial stability, money laundering, and monetary sovereignty.
  • De Cos noted that stablecoins can increase bank funding costs and break the 'singleness' of money.
  • U.S. Treasury Secretary Scott Bessent previously supported stablecoins, viewing them as a digital revolution.

Pablo Hernandez de Cos, General Manager of the Bank for International Settlements (BIS), stated that stablecoins are not a credible means of payment at scale. He argued that tokenized deposits present a more compelling case for leveraging new technology in daily transactions.

Speaking at the U.S. Federal Reserve's Jackson Hole Economic Policy Symposium, de Cos acknowledged that stablecoins and tokenized deposits could coexist. However, he asserted that tokenized deposits should handle the majority of day-to-day payments, with stablecoins relegated to more specialized roles.

De Cos outlined several issues with stablecoins, including potential increases in bank funding costs as funds are diverted from lenders, leading to higher rates for ordinary borrowers. He also noted that stablecoins disrupt the "singleness" of money, as users incur costs when moving between products. Furthermore, he raised concerns about money laundering due to inconsistent control application and the potential erosion of monetary sovereignty in jurisdictions outside the U.S. if dollar-pegged stablecoins gain significant traction.

Despite these criticisms, U.S. Treasury Secretary Scott Bessent has previously expressed support for stablecoins, describing them as a digital revolution that could enhance the dollar's global reserve status and drive demand for U.S. Treasuries. De Cos concluded that tokenized deposits offer a more direct route to harnessing tokenization while preserving the foundations of the monetary system, though they still face hurdles in interoperability, governance, and legal aspects.

Frequently asked questions

The BIS chief, Pablo Hernandez de Cos, stated that stablecoins are not a credible means of payment at scale and should serve more specialized roles.

De Cos suggested that tokenized deposits offer a more compelling case for harnessing new technology in day-to-day payments.

Concerns included financial stability, money laundering, increased bank funding costs, breaking the 'singleness' of money, and eroding monetary sovereignty in non-U.S. jurisdictions.

U.S. Treasury Secretary Scott Bessent has supported stablecoins, calling them a digital revolution that could help cement the dollar's position as the world's top reserve currency.

What Happens Next

01De Cos is a candidate to replace European Central Bank President Christine Lagarde next year.
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How It Developed

BIS General Manager Pablo Hernandez de Cos stated stablecoins are not credible for large-scale payments.
De Cos argued tokenized deposits are a more compelling case for harnessing new technology in daily payments.
He cited issues with stablecoins including financial stability, money laundering, and monetary sovereignty concerns.
De Cos noted that stablecoins break the 'singleness' of money and can raise bank funding costs.
U.S. Treasury Secretary Scott Bessent has previously supported stablecoins as a digital revolution.

Sources

T1
Stablecoins not a credible means of payment at scale, BIS chief saysReuters

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