The Bank for International Settlements has issued a stark warning about the fundamental instability of stablecoins, arguing they cannot function as dependable payment instruments without central bank support. The assessment was published in its Annual Economic Report.
The core deficiency, identified as 'singleness,' is the guarantee of redemption at par with central bank money. The report details four structural failures: unreliable redeemability, inelastic liquidity during market stress, fragmented interoperability between ecosystems, and vulnerability to financial crime on permissionless blockchains.
The BIS cautions that widespread use of USD-pegged stablecoins threatens monetary sovereignty in emerging economies. It also notes that a mass migration of bank deposits into stablecoins could deprive banks of cheap funding, potentially constraining lending, though the overall drag on economic growth is projected to be modest.
The institution proposes an alternative: a unified ledger system. This framework integrates the benefits of tokenization-such as atomic settlement and programmability-within the existing two-tier monetary structure. In this model, tokenized central bank reserves form the foundation, guaranteeing stability, while regulated commercial banks issue tokenized deposits and payment instruments on top.
The report points to Project Agora, a BIS initiative exploring public-private cross-border payment solutions, as a practical example of this architecture in development. Coordinated global regulation remains a key recommendation to manage the current ecosystem's risks.