BIS says stablecoins act more like ETFs than money, warns of fragmentation without global rules: report

The Bank for International Settlements has reiterated the need for global coordination on stablecoin rules, which the institution said function more like investment vehicles than money, Reuters reported on Monday. 

The bank for central banks comment arrives as stablecoin supply continues to expand. Total circulation for dollar-pegged tokens has exceeded $300 billion, per The Block’s data dashboard. Tether’s USDT leads with a market cap of nearly $186 billion, while Circle’s USDC ranks second at approximately $78.8 billion.

According to BIS General Manager Pablo Hernandez de Cos, this market concentration, where two issuers account for roughly 85% of global circulation, exhibits “redemption frictions” and frequent price deviations that make stablecoins resemble “securities rather than money.” He further specified that these assets currently operate more like exchange-traded funds than traditional payment instruments.

He also warned that stablecoins could undermine monetary and fiscal policy, trigger financial market stress, and hamper efforts to fight illicit finance. He called for international cooperation, saying divergent frameworks across jurisdictions “could lead to severe market fragmentation or enable harmful regulatory arbitrage.”

Additionally, de Cos reiterated concerns about potential runs on stablecoins, saying large redemptions could transmit stress to broader markets. He said those risks could be reduced if issuers had access to safeguards such as deposit-insurance-type arrangements or central bank lending facilities, according to Reuters. 

On the question of whether stablecoins should pay interest like bank accounts, the report noted that de Cos said shifts from bank deposits to stablecoins “may be less pronounced if stablecoin holdings remain unremunerated” during periods of high interest rates. He added the caveat: “if prohibitions on paying interest on stablecoins can be enforced.”

Global stablecoin adoption rises

The BIS warning arrives as several studies point to expanding real-world use of stablecoins. A February report from payments firm BVNK, conducted with Coinbase and Artemis and based on a YouGov survey of 4,658 adults across 15 countries, found 54% of respondents held stablecoins in the prior 12 months, and 56% planned to acquire more. 

The report also found freelancers and marketplace sellers receiving stablecoin payments derived about 35% of their annual earnings from those transfers.

At the same time, policymakers are debating the dominance of dollar-pegged tokens. French Finance Minister Roland Lescure said last week that the relatively small size of euro-pegged stablecoins compared with the dollar-linked market was “not satisfactory,” urging European banks to expand euro-denominated tokens and tokenized deposits.

Industry executives have also raised the possibility of competing currency-linked stablecoins. Circle CEO Jeremy Allaire recently said that there is a “tremendous opportunity” for a yuan-backed stablecoin and that China could launch one within the next three to five years, though Chinese authorities currently prohibit offshore issuance of yuan-pegged stablecoins without regulatory approval.

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