The Bank for International Settlements (BIS) has raised new concerns about stablecoins, especially given that two issuers dominate the global supply. BIS General Manager Pablo Hernandez de Cos emphasized the need for stronger international coordination on regulation, warning that firms may gravitate toward jurisdictions with weaker rules.
He cautioned that inconsistent regulatory frameworks could lead to market fragmentation or regulatory arbitrage. Speaking in Japan, he also warned that stablecoin runs could trigger broader financial stress, though such risks might be reduced through mechanisms similar to deposit insurance or central bank liquidity support.
De Cos argued that major stablecoins—primarily issued by Tether and Circle, which together account for roughly 85% of the $315 billion market—behave more like securities than money, comparing them to ETFs. He noted that market concentration could introduce redemption frictions and distort asset valuations.
Many Reasons for Concern
The BIS has also been advocating for central bank digital currencies (CBDCs) as a potential alternative for cross-border payments, placing them in indirect competition with stablecoins.
“Three Nobel Prize-winning economists, Jean Tirole, Paul Krugman, and Simon Johnson, have all raised strong concerns that echo the ones raised here by the BIS,” said Hugh Thomas, Lead Analyst, Commercial and Enterprise at Javelin Strategy & Research.
To Thomas’ point, they broadly argue that stablecoins could be prone to run-like dynamics if confidence in their backing weakens, while shifting money-like functions into private hands without a clear public-interest case. They also warn that regulation may not be robust enough for the scale envisioned, that widespread adoption could create spillover risks for funding markets and financial stability, and that stablecoins open new channels for money to move outside the traditional banking system’s oversight.
Explorations of Its Own
BIS is increasingly focused on shaping the future architecture of global digital money and payments. As a coordinating platform for major central banks, it’s working to improve efficiency and interoperability of cross-border payment systems in a more digitized financial environment.
These efforts are closely tied to its broader concerns about the rapid growth of stablecoins and the risks they may pose if left unevenly regulated. By exploring how CBDCs could operate on a shared platform alongside private digital assets, the BIS is testing alternatives that could reduce reliance on dominant stablecoin issuers.
Its work on initiatives such as Project Agora, which examines how tokenized bank deposits might be used in cross-border payments, points to a potential future where regulated public and private money systems compete or coexist under tighter global coordination.
