Tether CEO Paolo Ardoino has challenged the Bank for International Settlements' preference for tokenized bank deposits, arguing that fully reserved stablecoins give users a stronger alternative to money held under fractional reserve banking.
BIS Case for Tokenized Deposits
BIS General Manager Pablo Hernández de Cos told the Jackson Hole Economic Symposium on Aug. 28 that stablecoins still fall short of several properties needed to function as money at scale. He argued that stablecoins face problems with redeemability at par, interoperability and financial integrity, while their use outside the United States can create concerns over monetary sovereignty and digital dollarization.
In the BIS model, tokenized deposits remain liabilities of commercial banks and settle through central bank accounts. De Cos said this structure preserves the "singleness" of money because different bank liabilities remain redeemable at par through central bank settlement. A user holding USDT who needs to pay someone accepting only USDC may first need to exchange one token for another in a secondary market, where prices can deviate from their dollar pegs during stress.
Ardoino Questions Fractional Reserve Banking
Ardoino responded by questioning why savers would choose bank deposits when stablecoins can hold reserves in highly liquid assets such as U.S. Treasuries. "BIS is rightfully worried about the fact that stablecoins are exposing the emperor without clothes," Ardoino said. "Why someone should choose to put his savings into a fractional reserve product while stablecoins are fully reserved?"
His comments put the reserve question at the center of a debate that has increasingly divided stablecoin issuers and the banking sector as both compete to move fiat-denominated money onto blockchain networks. Unlike stablecoins, customer funds in tokenized deposits do not move into a separate reserve portfolio and can remain available to support the bank's lending operations.
Tokenized Deposits Move Beyond Pilots
Banks have started building infrastructure around the tokenized deposit model. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are developing a shared deposit token network through The Clearing House, with a launch targeted for the first half of 2027. SWIFT launched a blockchain-based shared ledger with 17 major banks in July, designed around tokenized bank deposits for round-the-clock cross-border payments.
Deposit Flight Concerns Reach U.S. Lawmakers
The competition for deposits has become part of the U.S. debate over crypto market structure. Banking groups have pushed lawmakers to tighten stablecoin reward provisions in the CLARITY Act, arguing that allowing crypto platforms to provide rewards on stablecoin balances could encourage customers to move funds out of traditional bank accounts. Citigroup CEO Jane Fraser warned that stablecoin rewards could draw deposits away from banks and affect their ability to extend credit.
Despite supporting tokenized deposits, Hernández de Cos acknowledged that the model has its own unresolved problems. No multi-bank or cross-jurisdictional ecosystem currently issues tokenized deposits through a fully interoperable framework. The BIS chief said stablecoins and tokenized deposits could ultimately coexist, with tokenized deposits handling most everyday payments while stablecoins serve specialized functions.
