Key Highlights
- BIS warns stablecoin growth could weaken banks by pulling deposits away and tightening lending conditions globally.
- Stablecoins still see limited real-world use, with most activity concentrated in crypto trading despite huge transaction volumes.
- Global regulators are tightening rules as fragmented policies raise risks of instability and regulatory arbitrage across regions.
Global financial stability concerns have intensified after the Bank for International Settlements (BIS) warned that widespread stablecoin adoption could strain banks and complicate monetary policy.
Speaking at a Bank of Japan seminar in Tokyo, BIS General Manager Pablo Hernández de Cos acknowledged the “attractive technological features” of stablecoins—such as programmability and atomic settlement—but argued they currently fall short of the requirements for a safe and widely used means of payment.
According to him, stablecoins are still mostly used in crypto trading and as collateral. However, he warned that if more people start using them, money could move out of traditional bank deposits. That could reduce the funds banks rely on to lend. As a result, lending could become tighter, and the normal way monetary policy spreads through the economy could weaken.
Stablecoin use still limited in real economy
The General Manager provided a stark reality check on the role that stablecoins play in everyday payments. Their total market value stood at about $315 billion in early 2026. In 2025, transaction volumes reached roughly $35 trillion, but most of that activity stayed within crypto markets rather than real-world payments.
He added that stablecoin payment flows were about $390 billion in 2025. By comparison, US bank deposits were close to $8 trillion. That gap shows how small stablecoin use still is in the broader financial system. He also pointed out ongoing issues, including poor compatibility between systems, uncertainty in guaranteed value, and challenges in redeeming them at full value.
Financial stability risks
Hernández de Cos further warned that if stablecoins grow too quickly, they could create several risks for the financial system. Banks could face less funding, which may reduce their ability to lend. In times of stress, he said, there could also be sudden withdrawals that add pressure to the system.
He added that wallets outside regulated platforms and blockchain transfers could make it harder to track transactions. That, he said, weakens checks used to prevent money laundering and terrorist financing.
He also pointed out gaps in identity verification that could allow some activity to move outside regulated channels. He stressed that stronger oversight rules are needed to manage these risks.
Tightened global regulatory oversight
As jurisdictions like the UK, European Union, and Japan move forward with their own distinct frameworks, the BIS is urging for “coordinated progress.” Hernández de Cos warned that without global standards, the industry faces severe fragmentation.
He stressed that countries need to work together on the rules. Without coordination, he warned, different regulations across regions could push companies to move operations to easier jurisdictions and create instability in the system.
He specifically highlighted Project Agorá—a BIS-led experiment involving seven central banks and 40 private institutions—as the preferred path forward. The goal is to integrate tokenized commercial bank money with central bank money, preserving the “two-tier” system that has stabilized global finance for decades.
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