BIS chief says stablecoins not credible for payments at scale, favors tokenized deposits

At the Jackson Hole symposium, Bank for International Settlements chief Pablo Hernandez de Cos declared that stablecoins fail as credible large-scale money, citing issues with par redeemability, interoperability, and financial integrity. He advocated for tokenized deposits to handle everyday payments. While U.S. Treasury Secretary Scott Bessent supports stablecoins for boosting Treasury demand, de Cos warned they threaten monetary sovereignty and could raise bank funding costs for ordinary borrowers.

BIS stablecoin payment critique

• ▪Pablo Hernandez de Cos argued that stablecoins fail to uphold the foundational properties of money due to shortcomings in par redeemability, elasticity, interoperability, and financial integrity.
• ▪The global stablecoin supply reached $308 billion as of August 2026, representing a year-over-year increase of more than 14%, with Tether's USDT accounting for approximately 60% of the total.
• ▪Bank for International Settlements General Manager Pablo Hernandez de Cos stated at the Jackson Hole Economic Policy Symposium on August 28, 2026, that stablecoins are unlikely to serve as a credible foundation for large-scale payments.
• ▪Pablo Hernandez de Cos stated that stablecoins challenge the singleness of money because users cannot move freely between different stablecoin products without buying and selling them at a cost.

Tokenized deposits alternative

• ▪Pablo Hernandez de Cos proposed tokenized deposits as a safer, more direct alternative to stablecoins that can harness the benefits of tokenization while preserving the existing monetary system.
• ▪The Bank for International Settlements is testing cross-border settlements using tokenized commercial bank money and central bank reserves through Project Agora, which transitioned to real-value testing in 2026.
• ▪Pablo Hernandez de Cos acknowledged that tokenized deposits still face unresolved challenges regarding interoperability, governance, and legal questions around settlement finality.

Stablecoin regulatory fragmentation

• ▪A Financial Stability Institute study published in August 2026 revealed significant regulatory differences among the United States, European Union, United Kingdom, Hong Kong, and Singapore regarding which entities may issue stablecoins.
• ▪Under the United States GENIUS Act enacted in July 2025, permitted payment stablecoin issuers are generally restricted from engaging in lending, staking, proprietary trading, and third-party crypto custody.
• ▪The United States Treasury proposed rules in April 2026 under the GENIUS Act to treat permitted payment stablecoin issuers as financial institutions subject to Bank Secrecy Act anti-money laundering regulations.

Digital dollarization sovereignty concerns

• ▪Pablo Hernandez de Cos warned that widespread adoption of dollar-pegged stablecoins outside the United States could accelerate digital dollarization and weaken domestic monetary sovereignty.
• ▪United States Treasury Secretary Scott Bessent defended stablecoins, asserting they represent a digital revolution that could cement the dollar's global reserve status and generate demand for U.S. Treasuries.

Bank funding cost impacts

• ▪Pablo Hernandez de Cos warned that stablecoins could disrupt bank funding by pulling retail deposits away from commercial lenders, potentially raising marginal funding costs for banks.
• ▪While stablecoin reserve purchases of short-term debt could lower government borrowing costs, Pablo Hernandez de Cos noted that banks might pass their higher funding costs onto ordinary borrowers.

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