TL;DR:
- The BIS warned that dollar-denominated stablecoins could have material consequences for global financial stability.
- Pablo Hernández de Cos cautioned that these tokens behave more like ETFs than cash, generating potential bank runs.
- Europe, the UK and Switzerland are advancing their own regulatory frameworks amid the growth of cryptocurrencies in everyday payments.
The Bank for International Settlements (BIS) presented a report on the growth of US dollar-denominated stablecoins. Pablo Hernández de Cos, the organization’s general manager, warned during a Bank of Japan seminar in Tokyo that these tokens could generate “material consequences” for financial stability and economic policy if they reach a scale comparable to that of traditional money.
De Cos noted that the leading dollar stablecoins, such as USDT and USDC, share characteristics with investment products rather than with cash. He specifically mentioned the fees and conditions on primary market redemptions, as well as episodes in which their prices deviate from parity in secondary markets.
In his analysis, those traits bring them closer to the behavior of exchange-traded funds (ETFs), though without losing the capacity to generate runs and financial contagion, given that issuers hold short-term public debt and bank deposits as reserve assets. In a stress scenario, he warned, mass withdrawals could force sales of those reserves in already strained markets or shift funding pressure onto banks.
The official also noted that the use of permissionless public blockchains and non-custodial wallets leaves a considerable portion of activity outside anti-money laundering and counter-terrorism financing controls, making stablecoins attractive for illicit uses unless specific safeguards are implemented at the system’s entry and exit points.
Stablecoin Regulation at a Global Level
Multiple jurisdictions are recalibrating their regulatory frameworks. Denis Beau, first deputy governor of the Banque de France, urged the European Union to go beyond the original text of the Markets in Crypto-Assets Regulation (MiCA), limiting the use of non-euro-denominated stablecoins in everyday payments and reducing regulatory arbitrage during periods of stress.
The European Central Bank, for its part, compared euro-denominated stablecoins to tokenized money market funds, noting that both perform liquidity transformation and are exposed to potential runs, but operate under different transparency and management regimes.
In the United Kingdom, members of the House of Lords questioned Coinbase in March over whether stablecoins could drain commercial bank deposits or facilitate criminal activities. The government is finalizing a specific regime for fiat-backed tokens. In Switzerland, UBS and several local banks launched a Swiss franc stablecoin pilot on April 8 within a sandbox, seeking to explore blockchain payments within the traditional financial system.
