BIS declares stablecoins structurally unfit as money

The Bank for International Settlements on Sunday released its 2026 Annual Economic Report at its yearly general meeting in Basel, Switzerland, delivering a sweeping critique of stablecoins and declaring them structurally incapable of functioning as genuine money.theblock+1

Falling Short on Four Tests

In a chapter titled "Anchoring trust in money: innovation beyond stablecoins," the BIS judged today's dollar-pegged tokens against what it considers foundational properties of any monetary system: singleness, elasticity, interoperability, and integrity. Current stablecoin designs fail on all counts, the authors argued, noting that prices frequently deviate from their pegs in secondary markets and that redemptions involve friction that makes the tokens resemble exchange-traded fund shares more than a means of payment.kucoin+2

The comparison to ETFs echoes remarks made in April by BIS General Manager Pablo Hernández de Cos, who described major stablecoins — primarily issued by Tether and Circle — as behaving "more like securities than money".theblock+1

Macro Risks and "Stablecoin Dollarization"

The report warned that the roughly $320 billion stablecoin market, more than 99 percent of which is pegged to the U.S. dollar, poses risks that extend well beyond crypto markets. According to BIS modeling, even if the sector expands to between $1 trillion and $3 trillion, the net impact on economic output would be minimal or slightly negative, because increased bank funding costs would reduce credit provision.kucoin+1

The BIS also flagged what it called "stablecoin dollarization" — a scenario in which households in emerging economies adopt dollar-referenced tokens as a store of value, reshaping capital flows and eroding monetary sovereignty. The report noted that stablecoins account for a large share of illicit on-chain activity due to circulation on permissionless blockchains where pseudonymity weakens anti-money-laundering controls.theblock+1

A Tokenized Alternative

Rather than abandon tokenization altogether, the BIS urged central banks and the financial industry to bring the technology into the existing two-tier system of central bank and commercial bank money. The centerpiece of the proposed framework is a "unified ledger" that would hold tokenized central bank reserves alongside tokenized commercial bank deposits and other regulated private money, with central bank money serving as the settlement anchor. The report called for globally coordinated policymaking along two tracks: tightening rules around existing stablecoin arrangements and accelerating work on tokenized alternatives that preserve monetary stability.intellectia+2