BIS Warns Stablecoins, Public Blockchains Could Fragment Monetary System

The Bank for International Settlements warned the rapid growth of stablecoins could fragment the global monetary system and weaken sovereign monetary control. In its Annual Economic Report the Basel-based institution assessed the roughly $316 billion stablecoin market and said tokens pegged to fiat lack the institutional features required to serve as safe, reliable money at scale.

It urged central banks and the financial industry to speed development of tokenized central bank money and tokenized commercial bank deposits as a safer alternative. The BIS highlighted risks from a large-scale migration of depositors into private digital tokens, which could reduce bank funding and constrain credit to the real economy.

The report flagged a trend of "stablecoin dollarization" — growing use of dollar-denominated stablecoins in countries with weaker domestic currencies — that could erode monetary sovereignty, blunt domestic policy effectiveness and raise exposure to volatile cross-border capital flows, especially in emerging markets.

Switzerland, Basel

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