BIS: "Stablecoins Could Cause Problems for Monetary Sovereignty and Financial Stability"

YM Lee

Summary

The Bank for International Settlements criticized that stablecoins could cause problems for monetary sovereignty and financial stability.
The report stated that due to their prepaid cash model, stablecoins limit financial flexibility and inevitably have lower credibility compared to central bank money.
While recognizing the advantages of fast settlement and programmability for stablecoins, the report concluded that it would be difficult for them to replace traditional money.

The Bank for International Settlements (BIS) has presented a critical view on stablecoins.

According to Coindoo on the 25th (local time), the Bank for International Settlements stated in a research report: "Stablecoins have not secured the three essential traits of money—singleness, resilience, and integrity," and, "Despite the increasing use of stablecoins, they could cause problems for monetary sovereignty and financial stability."

According to the report, stablecoins operate based on a 'prepaid cash' model, which restricts financial flexibility, makes it difficult to respond dynamically to changes in demand, and can result in different values being traded depending on the issuer's credibility and collateral, thereby inevitably falling short in credibility compared to central bank money.

However, the BIS did acknowledge the fast settlement and programmability of stablecoins. The report stated, "There are various advantages such as accessibility, fast settlement, programmability, and payments within capital-restricted regions. However, these features alone are not sufficient for stablecoins to act as a substitute for traditional money."

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