TL;DR:
- Tether defended stablecoins against the BIS, which claimed that tokenized bank deposits are better substitutes for fiat money.
- Paolo Ardoino argued that stablecoins are safer because they are fully backed; tokenized deposits only hold 10% in liquid assets.
- The dispute reveals banks’ fear that the CLARITY ACT could trigger a massive migration of deposits into stablecoins.
The CEO of Tether, Paolo Ardoino, responded sharply to statements made by Pablo Hernandez de Cos, Director General of the Bank for International Settlements (BIS), who argued that stablecoins do not constitute an effective substitute for fiat money.
De Cos listed among his criticisms the low redeemability, issues with supply and interoperability, and the facilitation of illicit activities. He also promoted tokenized bank deposits as a more direct path to harnessing tokenization without compromising the foundations of the monetary system.
Stablecoins -> instrument 100% reserved by liquid assets (ie. treasuries)
v.s.
Tokenized bank deposits -> pinky swear uninsured bank deposits (usually only 10% reserved by liquid assets).BIS is rightfully worried about the fact that stablecoins are exposing the emperor without… https://t.co/fc1yMq5fll
— Paolo Ardoino 🤖 (@paoloardoino) August 30, 2026
Tether: The Emperor’s New Clothes
Ardoino was quick to counter that argument forcefully: stablecoins are backed almost entirely by U.S. Treasuries, while tokenized bank deposits operate under fractional reserves, with only 10% collateral in liquid assets.
“The BIS is rightfully worried because the stablecoins are leaving the emperor with no clothes. Why would anyone choose to put their savings in a fractional reserve product when stablecoins have full reserves?”, the executive stated. His comparison targets the traditional banking model directly and exposes a structural vulnerability that the conventional financial system prefers not to discuss in these terms.
The Weight of USDT in Emerging Markets
The debate has moved well beyond the conceptual. USDT, Tether’s stablecoin, holds a market capitalization exceeding $183 billion, and its adoption in emerging economies is more than considerable. Ardoino himself noted that there are economies that rely heavily on USDT for both domestic and international trade.
That level of penetration is precisely what concerns banks amid the legislative debates in the United States: the Digital Asset Market Clarity Act, known as the CLARITY ACT, opens the possibility of cryptocurrency exchanges offering rewards for the use of stablecoins, which could trigger a large-scale migration of bank deposits.
“What happens to the financial system if people start realizing that stablecoins are safer and move their savings to the better asset class? We are in the phase of discovering the consequences,” concluded the CEO of Tether.
