BIS Report Questions Stability of Stablecoins
A recent report from the International Bank for Reconciliation (BIS) raises doubts about whether stablecoins actually function as effective forms of money in today’s financial landscape.
According to the BIS Annual Economic Report 2025, stablecoins do not meet essential criteria for currency, namely “single,” “resilience,” and “integrity.” The report casts stablecoins in the light of “digital bearer instruments,” arguing they are akin to financial assets rather than true currency. It suggests that stablecoins struggle under these key tests for operating as foundational elements within the financial system.
In contrast to centrally backed currencies, which are accepted universally and do not involve rigorous checks, private companies issue stablecoins, which frequently fluctuate in value. This variability undermines the fundamental aspects of financial consistency, the report highlights.
Concerns About Elasticity and Integrity
One important aspect discussed is elasticity, significant for absorbing economic shocks and facilitating high-value transactions. The report indicates that acquiring more stablecoin requires a complete upfront payment, resembling a “strict cash advance” model, which restricts flexibility unlike modern banking systems where central banks can inject liquidity when needed.
Perhaps the most alarming finding relates to integrity. The BIS contends that the structure of stablecoins, especially those traded via unregulated wallets on public blockchains, makes them more susceptible to financial crime.
“Stablecoins have notable weaknesses regarding the integrity of the financial system,” the report warns, pointing to vulnerabilities like money laundering and the avoidance of sanctions.
Limited Role for Stablecoins
BIS suggests that stablecoins should occupy a limited and heavily regulated role in the financial ecosystem, acknowledging their appeal due to cross-border accessibility and lower transaction costs.
The report cautions that society needs to relearn past lessons about problematic monetary systems. It calls for central banks and public institutions to collaborate with the financial sector to guide the system more effectively.
In the wake of the BIS’s findings, Circle, the entity behind USDC, experienced a significant drop in its share price—over 15%—falling to $222 after the report was published. This follows a peak of $299 just a day earlier.
Despite its critical stance on stablecoins, the BIS recognized tokenization as a “transformative innovation” for the future of financial systems, indicating that it should enhance rather than replace existing structures.
Some in the crypto community have stated, perhaps understandably, that given BIS’s position as a regulatory body tied to central banks globally, its critical survey of stablecoins aligns with expectations. Jim Walker, chief economist at Areteia Capital, remarked that the BIS’s perspective seemed overly alarmist towards cryptocurrencies, suggesting that the history of central banks should temper their critiques.
