The Bank for International Settlements (BIS) has concluded that stablecoins cannot serve as the foundation of a future monetary system.
In its newly published annual report, the global institution stated that fiat-pegged digital assets fall short of the three essential qualities of robust money: singleness, elasticity, and integrity.
“Stablecoins do not stack up well,” the BIS authors wrote, warning that despite their rising use, they pose challenges to monetary sovereignty and financial stability.
The Three Tests: Singleness, Elasticity, Integrity
The BIS report breaks down why stablecoins fail to qualify as sound money:
- Elasticity: Most stablecoins, like USDT, require full backing before issuance. This “cash-in-advance” model limits flexibility and fails to respond dynamically to shifts in demand, unlike central bank money which can expand or contract supply as needed.
- Singleness: True monetary singleness means money issued by different institutions is interchangeable at par. Stablecoins, however, are often issuer-specific and trade at different values depending on trust and backing, similar to private banknotes in the 19th-century U.S.
- Integrity: Because not all stablecoin issuers apply consistent anti-money laundering (AML) or know-your-customer (KYC) standards, the BIS argues they undermine the security and legal uniformity required in national monetary systems.
Utility vs. Systemic Role
The BIS acknowledges that stablecoins offer benefits like fast payments, programmability, and accessibility—especially in regions with capital restrictions or high inflation. However, these features do not qualify them as substitutes for traditional money, especially when weighed against the risks of regulatory fragmentation and financial crime.
Tokenization Still Holds Promise
While critical of stablecoins, the BIS struck a more optimistic tone on tokenized finance. It sees tokenization of central bank reserves, commercial bank money, and government bonds as a transformative opportunity to build a next-generation financial system that combines digital innovation with institutional trust.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
Source: https://coindoo.com/bis-stablecoins-fail-core-tests-to-be-future-money/