The Bank for International Settlements is renewing its criticism of stablecoins, with BIS General Manager Pablo Hernández de Cos arguing that the tokens do not credibly function as a means of payment at scale and that tokenized bank deposits offer a stronger alternative for modernizing money.
“Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos said, according to a Reuters report published on Friday. The comments come as governments worldwide build regulatory frameworks around stablecoins, creating an awkward gap between official enthusiasm for the technology and skepticism from the so-called central bank of central banks.
The timing is notable for another reason: de Cos is a candidate to succeed Christine Lagarde as president of the European Central Bank next year, a role from which he could shape the balance between stablecoins, tokenized deposits and the digital euro for years to come.
## Stablecoins could cut borrowing costs, but at a price
Hernández de Cos acknowledged one of the industry’s central arguments: stablecoins could lower government borrowing costs, a point also made by US Treasury Secretary Scott Bessent. If stablecoin issuers hold large reserves of short-term government debt, growing issuance can deepen demand for Treasuries and modestly reduce what governments pay to borrow.
But he warned the effect could cut both ways for consumers. If customers move bank deposits into stablecoins, banks could face higher funding costs and pass those expenses on to households and businesses through higher borrowing rates. In other words, cheaper government debt could arrive at the cost of more expensive credit for everyone else.
The BIS chief also pointed to more structural weaknesses. Interoperability between stablecoin platforms remains limited, making it hard for different tokens and systems to work together seamlessly. Anti-money laundering controls are difficult to apply consistently across issuers and jurisdictions. And growing use of US dollar-pegged stablecoins outside the United States could undermine monetary sovereignty, weakening domestic monetary policy in countries where the tokens circulate widely.
The critique lands at a moment of unprecedented stablecoin activity. Payment giants are piloting stablecoin settlement corridors, sports clubs are signing stablecoin sponsors, and traditional banks are exploring their own tokenized liabilities. Regulators in the US, the European Union, the United Kingdom, Hong Kong and Singapore have all either passed or drafted stablecoin frameworks.
## Regulators remain deeply divided
The BIS-linked Financial Stability Institute published a study on Thursday comparing stablecoin regulations across the US, the EU, the UK, Hong Kong and Singapore, and the findings reveal substantial differences in how the five major markets treat issuers.
The United States and Singapore take relatively restrictive approaches toward non-bank issuers. Under the US GENIUS Act, lending, staking, proprietary trading and custody of third-party crypto assets generally fall outside the activities permitted for payment stablecoin issuers.
Hong Kong, the UK and the EU take a less restrictive path, allowing some additional activities with separate authorization, regulatory consent or other applicable permissions. The result is a fragmented global landscape in which the same stablecoin business model can be legal in one major market and prohibited in another.
The researchers also identified a common thread across all five jurisdictions: restrictions apply to the issuing entity rather than the wider corporate group. That means other companies within a stablecoin issuer’s corporate family can conduct activities that the regulated issuer itself cannot, a structural nuance that effectively softens the perimeter of every framework studied.
## Why tokenized deposits appeal to central bankers
The preference for tokenized deposits reflects a fundamental divide over the future of money. Stablecoins are private liabilities, typically backed by reserves of cash and government debt, and they operate largely outside the banking system. Tokenized deposits are claims on commercial banks, moved over programmable ledgers but settled within the existing regulatory perimeter.
For institutions like the BIS, the second approach preserves the two-tier banking system, deposit insurance, central bank oversight and lender-of-last-resort protections, while still capturing efficiency gains from tokenization. Stablecoins, by contrast, create parallel money that policymakers cannot directly control.
Critics of the BIS position argue that dismissing stablecoins ignores how they are actually used. Cross-border remittances, dollar access in emerging markets, and crypto market settlement have all grown on stablecoin rails, often faster and cheaper than bank alternatives. Whether regulators’ preferred alternative can match that adoption is an open question.
What is clear is that the argument is no longer academic. With stablecoin legislation on the books in the US, frameworks live in the EU, and the next ECB president potentially on the record against stablecoins as payment instruments, the contest between private tokens and bank-issued digital money is moving into its decisive phase.
de cos wants tokenized deposits because banks keep the margin. stablecoins cut them out of the loop, thats the whole fight
and meanwhile the US passed the GENIUS Act and issuers keep stacking treasuries. europe will talk itself into irrelevance while dollar stablecoins take the rails
he admits stablecoins could cut government borrowing costs, then argues against them anyway. the mental gymnastics are impressive
and this guy is a candidate to run the ECB next year. expect the digital euro to get pushed hard while USDT and friends get squeezed in europe
The man arguing stablecoins are not credible at scale is also campaigning to run the ECB. That is not a coincidence, that is a job interview.
the job interview framing is spot on. every speech he gives now is a pitch to frankfurt, de cos has been anti stablecoin since miami 2025
the ECB campaign angle is fun but his settlement layer argument is the actual threat. card networks do not clear their daily volume in minutes either and nobody calls them incredible
exactly on the card network point. visa settles net several days later, yet thats fine and a chain finalizing in 3 seconds is not credible
he literally admits stablecoins could cut government borrowing costs then says banks would just pass higher funding costs to households. both things can be true and he picks the scary one
tokenized deposits are just… a bank ledger with a new coat of paint. of course BIS prefers the thing banks control
kinda, but tokenized deposits stay inside the regulated perimeter with deposit insurance. that coat of paint actually matters when something breaks
the bis position paper reads like banks wrote it themselves. tavros coin paper is literally their answer to usdt and nobody asked for it
Bessent on one side, de Cos on the other. Regulators are not divided, they are on different continents philosophically.