The Bank for International Settlements said that while tokenization can enhance efficiency and open new possibilities in cross-border payments and securities markets, stablecoins pose a risk to financial stability and monetary sovereignty without regulation.
Details: In a special chapter of BIS's Annual Economic Report 2025, the global institution said:
Stablecoins perform poorly when assessed against three tests for serving as the mainstay of the monetary system.
The circulation of stablecoins without issuer oversight raises concerns about their use for financial crime.
Stablecoins fare poorly on singleness and elasticity, lacking the settlement function provided by central banks, trading at varying exchange rates, and imposing a cash-in-advance constraint.
There is an inherent tension between stablecoins’ promise to always deliver par convertibility (i.e., be truly stable) and the need for a profitable business model that involves liquidity or credit risk.
If stablecoins continue to grow, they could pose financial stability risks, including the tail risk of fire sales of safe assets.
Bank-issued stablecoins may introduce new risks, depending on their legal and governance arrangements.
Congressional Debate: As Congress continues to consider legislation to establish a regulatory framework for currently unregulated stablecoins following last week’s Senate passage of the GENIUS Act, ICBA this week urged House Financial Services Committee Chairman French Hill (R-Ark.) to ensure any measure considered by the House includes guardrails against negative economic consequences that would result from community bank disintermediation.