BIS chief: Stablecoins not reliable for payments at scale

BIS General Manager Pablo Hernández de Cos addressed the Federal Reserve’s Jackson Hole symposium on Aug. 28, 2026, arguing that stablecoins in their current form do not meet the basic properties required of money and are not a credible means of payment at scale. He presented tokenised deposits as a more reliable alternative for everyday and wholesale payments.

The speech, titled “Pushing the monetary frontier: stablecoins and tokenised deposits,” compared the instruments against what Hernández de Cos described as the foundations of money: a common unit of account and the singleness of money, plus supporting features such as liquidity elasticity, interoperability and financial integrity. He said “money works because users do not have to verify each instrument at every payment.”

On singleness, Hernández de Cos pointed to conversions between tokens such as USDT and USDC. He noted that if different parties accept different stablecoin tickers, users depend on secondary markets to convert tokens. Those markets can trade away from par, particularly under stress, and there is no built-in mechanism across stablecoins to ensure one-to-one redeemability into central bank money.

Interoperability was described as a second shortcoming. Many fiat-referenced stablecoins circulate as bearer-like tokens on public, permissionless blockchains that are fragmented across base networks and layer-two solutions. The same ticker on different chains is not automatically fungible without bridges or other workarounds. Tokenised deposits, by contrast, are account-based bank liabilities on permissioned platforms with interbank settlement through central bank accounts, which preserves par settlement and finality.

Hernández de Cos also raised financial integrity concerns. He said a majority of stablecoin balances sit in self-custodied wallets and that a growing share of transfers occurs outside venues with know-your-customer checks. That pattern complicates anti-money-laundering and counter-terrorist-financing enforcement. Tokenised deposits would remain in supervised account environments, which he said would ease compliance and oversight.

The BIS official outlined macro-financial channels tied to the composition of reserves backing stablecoins. If backing shifts into wholesale bank deposits, banks’ marginal funding costs could rise and lending could tighten. Heavy backing with short-dated government bills could draw high-quality liquid assets from banks. If backing relied on central bank reserves, it could reduce reserves available to the banking sector. Model-based scenarios from the BIS indicated modest net output effects overall, contingent on the mix of reserves, the public debt profile and foreign demand for stablecoins.

Hernández de Cos described run risk when issuers lack deposit-style backstops. Rapid withdrawals could force fire sales of assets and stress core money markets, while issuers that hold central bank reserves might instead draw flows away from banks during stress periods.

He said tokenised deposits keep activity inside the two-tier monetary system and maintain the link between deposit-taking and credit provision, which lowers disintermediation risk. He added that the market is not yet ready for tokenised deposits at scale: there are no large interoperable multi-bank or cross-border ecosystems and many current examples resemble bank-issued stablecoins. He listed scaling challenges including interoperability without closed networks, governance and access rules, legal clarity on settlement finality and smart contracts, operational resilience, and migration paths that coexist with legacy systems. He pointed to public-private initiatives such as Project Agorá as early evidence of feasibility.

Hernández de Cos sketched a coexistence model in which tokenised deposits carry the bulk of day-to-day payments and wholesale settlement, settled in central bank money, while stablecoins serve specialised roles under transparent regimes that enforce par redemption for payments or are treated as investment products with conduct and disclosure rules. He did not call for a ban on stablecoins and urged central banks to prioritise singleness on programmable rails, interoperability, financial integrity and system-wide assessment of credit, stability and monetary-transmission risks.