The Bank for International Settlements’ general manager told the Federal Reserve’s Jackson Hole symposium that stablecoins, in their current form, are not a credible means of payment at scale. His remarks pushed tokenized bank deposits to the center of the debate over the future of programmable money.
BIS stablecoins payment test was the framing General Manager Pablo Hernández de Cos used on Aug. 28 as he laid out why dollar-pegged tokens fall short of what a functioning monetary system requires. Speaking in his official capacity at the Federal Reserve’s annual gathering in Wyoming, de Cos argued that tokenized bank deposits offer a cleaner route to programmable payments because they remain inside the regulated banking perimeter and ultimately settle through central bank money. “Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” he said.
His critique did not amount to a call for prohibition. De Cos acknowledged that stablecoins and tokenized deposits could coexist if regulators carved out distinct roles and imposed appropriate safeguards. Under his preferred model, tokenized deposits would handle most everyday and wholesale payments, while stablecoins would serve narrower functions such as decentralized lending.
De Cos evaluated stablecoins against three characteristics he considers central to a sound monetary system: singleness, interoperability and financial integrity. Singleness, the idea that different forms of money denominated in the same currency stay interchangeable at par, is the first test. A dollar held in one regulated bank should equal a dollar held in another, he noted. Stablecoins do not always clear that bar in secondary markets, where a holder of USDT may have to offload it before accepting a counterparty that only takes USDC, and either token can drift above or below one dollar during periods of stress.
Tokenized deposits, by contrast, remain liabilities of regulated commercial banks. A transfer can debit one customer’s balance and credit another’s while the underlying settlement flows through central bank accounts, preserving the link to the ultimate monetary anchor. Interoperability is the second hurdle. Stablecoins travel across multiple blockchains and scaling networks, and moving the same token between chains often requires bridges, centralized intermediaries or wrapped assets, each introducing operational, custody or smart-contract risks.
BIS stablecoins payment test: Why tokenized deposits lead the new monetary map
De Cos’s Jackson Hole speech argued that tokenized commercial bank deposits preserve the monetary system’s integrity in three ways that stablecoins cannot match. BIS stablecoins payment test rests on the singleness of money — every tokenized dollar remains a claim on a regulated bank, redeemable at par through central bank settlement. Interoperability follows from that institutional anchor. Financial integrity, the third pillar, falls back to the supervisory perimeter banks already operate inside.
De Cos conceded that tokenized deposits also face interoperability problems. Most current projects run on permissioned networks that do not freely communicate with other platforms, and he acknowledged that no multi-bank, cross-border tokenized deposit system is yet operating at full commercial scale. Financial integrity was his third concern. Public blockchains allow users to hold and transfer assets without a regulated custodian in the middle, a structure that can complicate the consistent application of anti-money laundering and counterterrorist financing controls.
He was careful to note that self-custody is not synonymous with illicit finance. The point, he said, is that regulators cannot always identify counterparties as easily as they can inside a bank account system, and policymakers still need to decide how AML rules should govern peer-to-peer transfers while preserving privacy.
The BIS chief had previously warned that dollar-backed tokens could create financial stability risks if they grow without the safeguards traditional banking relies on. Stablecoin issuers commonly hold Treasury bills and other short-term liquid assets to back their circulating tokens. The U.S. Treasury Department has pointed out that the GENIUS Act, which became law in July 2025, requires permitted payment stablecoins to maintain one-for-one reserves in cash, deposits, repurchase agreements and Treasury securities with remaining maturities of 93 days or less. Treasury Secretary Scott Bessent has argued that stablecoin growth could deepen international demand for dollars and U.S. government debt, calling the sector a revolution in digital finance when the GENIUS Act passed.
De Cos accepted that stablecoins could lower government borrowing costs, particularly when additional demand comes from outside the United States. Foreign users who acquire stablecoins effectively add to demand for Treasury bills rather than displacing domestic buyers. But he warned the flip side could squeeze private borrowers. If households shift money from bank deposits into stablecoins, banks may lose a relatively stable and inexpensive funding base. Issuers could redeposit some of those funds as wholesale deposits, yet wholesale funding tends to be more concentrated and more sensitive to interest rate movements, potentially pushing banks to raise loan prices or hold more liquid assets. Smaller lenders, which lean more heavily on retail deposits, could come under greater pressure.
Reserve structures also create possible contagion channels. A wave of redemptions could force an issuer to dump Treasury bills or pull large deposits, putting stress on short-term funding markets at the worst possible moment. De Cos described these as scenarios rather than confirmed forecasts, citing BIS modeling that found only a modest overall economic effect, with the outcome depending on reserve composition, the structure of government debt and whether stablecoin demand originates domestically or abroad.
The speech followed by one day a study from the BIS-linked Financial Stability Institute comparing stablecoin rules in the United States, European Union, United Kingdom, Hong Kong and Singapore. The report found wide divergence over which entities may issue stablecoins and which additional activities they may conduct. All five jurisdictions generally restrict issuers to issuance, redemption and reserve management, but they differ on lending, staking, proprietary trading and custody. The United States and Singapore take relatively restrictive approaches toward specialized non-bank issuers, while the EU, UK and Hong Kong allow certain extra activities when issuers secure separate authorization. The study also flagged a potential group-level gap, noting that restrictions tend to apply to the legal entity issuing the stablecoin rather than across the wider corporate group, an issue that has drawn growing attention from prudential supervisors on both sides of the Atlantic. Taken together, the Jackson Hole remarks and the FSI study suggest that global regulators are coalescing around a two-track future in which tokenized deposits carry the bulk of programmable payment traffic and stablecoins play a more contained role, even as the BIS stablecoins payment test that de Cos outlined makes clear the path to that coexistence still runs through a hard look at credibility, interoperability and integrity.
Source: https://crypto.news/stablecoins-fail-payment-credibility-test-bis-says/