Stablecoins do not yet credibly function as a payment method at scale, Bank for International Settlements General Manager Pablo Hernández de Cos said on Aug. 28 at the Federal Reserve's Jackson Hole symposium, arguing that tokenized bank deposits offer a stronger route to programmable payments.
Three Characteristics of Money
De Cos assessed stablecoins against three characteristics central to a functioning monetary system: singleness, interoperability and financial integrity. Singleness means different forms of money denominated in the same currency remain redeemable at equal value. Stablecoins do not always meet this condition — a user holding USDT may need to sell it before buying USDC when a recipient accepts only the latter, and either token can trade above or below one dollar during stress.
Tokenized deposits remain liabilities of regulated commercial banks, with transfers settling through central bank accounts. De Cos argued this arrangement preserves the connection to central bank money.
Interoperability and Integrity Challenges
Stablecoins operate across several blockchains, and moving tokens between chains often requires bridges or wrapped assets, each introducing operational, custody or smart-contract risks. Tokenized deposits also face interoperability problems, as most current projects operate through permissioned networks that do not communicate freely with other platforms.
Financial integrity formed the third concern. Public blockchains allow users to hold and transfer assets without a regulated custodian, making anti-money laundering controls harder to apply consistently. De Cos said policymakers still need to determine how AML rules should apply to peer-to-peer transfers while protecting privacy.
Stablecoin Growth Creates Opposing Economic Effects
Stablecoin adoption could increase demand for short-term government debt. The U.S. GENIUS Act requires payment stablecoins to maintain one-for-one reserves using cash and Treasury securities with remaining maturities of 93 days or less. Treasury Secretary Scott Bessent has argued that stablecoin growth could strengthen international demand for dollars and U.S. government debt.
However, if households move money from bank deposits into stablecoins, banks may lose a stable source of funding. Smaller lenders could face greater pressure because they rely more heavily on customer deposits, potentially raising loan prices for households and small businesses.
Five Markets Apply Different Rules
A BIS-linked Financial Stability Institute study examined regulatory frameworks in the United States, European Union, United Kingdom, Hong Kong and Singapore. It found wide differences in which entities may issue stablecoins and which additional activities they may conduct. All five generally limit issuers to functions such as issuance, redemption and reserve management, though the specific restrictions vary by jurisdiction.
