BIS Claims Stablecoins Fail As Money, Calls For Strict Limits On Their Role

The Bank for International Settlements (BIS) has released a report challenging the idea that stablecoins can serve as money in a modern financial system. According to the report, stablecoins fail to meet three critical criteria: singleness, elasticity, and integrity. The BIS describes stablecoins as "digital bearer instruments" that resemble financial assets more than actual money. Unlike central bank-backed money, stablecoins are issued by private entities and often trade at fluctuating rates, undermining the principle of monetary singleness. Stablecoins also fail the elasticity test, as they require full upfront payment by their holders, unlike modern banking systems. The report claims that stablecoins are prone to financial crime due to their design, particularly those transacted via unhosted wallets on public blockchains. Despite their limitations, the BIS acknowledges the continued demand for stablecoins due to their cross-border accessibility and lower transaction costs. However, the report argues that stablecoins should only play a limited, well-regulated role in the financial system. The BIS praises tokenization as a "transformative innovation" for the next-generation monetary and financial system. The report's negative stance on stablecoins has been met with criticism from some in the crypto community, who view the BIS as biased against crypto.