At the annual Jackson Hole Economic Policy Symposium in Wyoming, Pablo Hernández de Cos, the general manager of the Bank for International Settlements (BIS), cautioned that stablecoins – crypto assets pegged to a stable value – do not provide a credible means of payment when used at scale. He argued that tokenized deposits, which represent digital versions of traditional bank balances, offer a more solid foundation for everyday transactions while still allowing the financial system to reap the efficiencies of tokenisation.
Stablecoins face practical and regulatory hurdles
De Cos highlighted several concerns that have been echoed by regulators worldwide. He noted that stablecoins can increase borrowing costs for sovereigns if they draw funding away from traditional lenders, potentially leaving ordinary borrowers with higher rates. The lack of true interoperability among stablecoin platforms also makes it difficult for users to move between products without incurring conversion costs.
Money‑laundering risks were another focal point. Because stablecoin operators often span multiple jurisdictions, consistent oversight is challenging, raising questions about the effectiveness of anti‑money‑laundering controls. De Cos warned that the growing use of dollar‑pegged stablecoins could threaten monetary sovereignty in countries that adopt them en masse, tying local economies more closely to U.S. monetary policy and undermining domestic policy transmission.
Tokenized deposits as a preferred alternative
According to the BIS chief, tokenized deposits preserve the “singleness” of money – the idea that a single unit of account can be used across the financial system without the need for costly conversions. By tokenising existing bank deposits, regulators can maintain the stability of the monetary system while still enabling faster, cheaper payments.
He acknowledged, however, that tokenized deposits are not without challenges. Interoperability, governance, and legal frameworks must be refined to ensure smooth settlement and protect consumer rights. Nonetheless, de Cos believes that addressing these issues will unlock a more direct path to harnessing digital tokenisation without compromising the foundations of the monetary system.U.S. Treasury Secretary Scott Bessent has taken a more supportive stance toward stablecoins, describing them as a “digital revolution” that could reinforce the dollar’s role as the world’s primary reserve currency and generate demand for U.S. Treasury securities. De Cos said the two instruments could coexist, but he stressed that stablecoins should be limited to specialised functions rather than serving as the backbone of everyday payments.
Implications for policymakers and the public
The BIS remarks arrive as governments and central banks worldwide grapple with how to integrate digital assets into existing financial architectures. For American families and businesses, the message is clear: while stablecoins may offer novel conveniences, they are not yet ready to replace traditional payment methods on a large scale. Tokenized deposits, backed by established banks and regulated frameworks, appear to be the more prudent route for achieving the benefits of digital finance without sacrificing stability.
As the debate continues, stakeholders—from regulators to fintech innovators—will need to balance innovation with the core principles of financial safety, consumer protection, and monetary sovereignty.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
