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Pablo Hernández de Cos didn’t mince words. The head of the Bank for International Settlements came out swinging against stablecoins, saying they lack the credibility needed for large-scale payment use — and he wants tokenized bank deposits to fill that gap instead.
Hernández de Cos, who also happens to be in the running for European Central Bank President, made clear that stablecoins fall short as a scalable payment solution. His preferred fix: tokenized bank deposits, which he thinks preserve the foundations of the traditional monetary system rather than chipping away at them. The BIS has been skeptical of stablecoins for years, and his comments land at a moment when governments worldwide are scrambling to write rules around these tokens before adoption outruns oversight. The Financial Stability Institute — a BIS-affiliated body — dropped a study the same week that maps out just how far apart major markets are on stablecoin regulation. Spoiler: pretty far apart.
Not a small disagreement, either.
What Hernández de Cos Actually Fears
He did acknowledge one point that US Treasury Secretary Scott Bessent has also raised — stablecoins could cut government borrowing costs. Fine. But that’s basically where the goodwill ends. Hernández de Cos pushed back hard on what happens to ordinary consumers if bank deposits start migrating into stablecoins at scale. Banks would face higher funding costs. Those costs don’t disappear — they get passed on through higher borrowing rates for households and businesses. So the average person taking out a mortgage or a small business loan could end up paying more, and probably wouldn’t know why.
There’s also the interoperability problem. Different stablecoin platforms don’t talk to each other cleanly, and enforcing anti-money laundering controls consistently across all of them is genuinely hard. Regulators can’t just apply one standard and call it done. And then there’s the dollar-peg issue. US dollar-pegged stablecoins are spreading fast outside American borders, which Hernández de Cos sees as a threat to monetary sovereignty in other countries — weakening domestic monetary policy tools for governments that can’t afford to lose them.
That’s a lot of problems stacked on top of each other.
Five Markets, Five Different Rulebooks
The FSI study, released Thursday, compared how five major jurisdictions handle stablecoin issuers: the US, European Union, United Kingdom, Hong Kong, and Singapore. What it found wasn’t exactly a coherent global picture. Each market has carved out its own approach, and the gaps between them are real.
The US and Singapore sit on the stricter end. The US GENIUS Act, for instance, bars payment stablecoin issuers from lending, staking, proprietary trading, and holding third-party crypto assets in custody. That’s a narrow lane to operate in. Singapore runs a similarly tight ship for non-bank issuers.
Hong Kong, the UK, and the EU are more flexible. Those markets let stablecoin issuers take on additional business activities — but only with specific regulatory authorizations or approvals in place. It’s not a free-for-all, but there’s more room to maneuver.
One structural quirk the study flagged: the restrictions in most of these frameworks target the issuing entity specifically, not the entire corporate group. So a stablecoin issuer within a larger conglomerate might be barred from lending, but a sister company under the same corporate umbrella could still do it. That’s either a sensible carve-out or a regulatory loophole depending on who you ask. The study didn’t pick a side, but the implication is clear — companies operating across multiple jurisdictions can probably find ways to keep certain activities alive even where the issuer itself can’t touch them.
No unified global framework exists right now. Unclear whether one is actually coming anytime soon.
The anti-money laundering angle keeps coming back too. Hernández de Cos said applying consistent AML controls across different stablecoin platforms is one of the harder problems regulators face. Stablecoin adoption is growing globally, and the patchwork of rules makes it easier for bad actors to find gaps. It’s not a theoretical risk at this point — it’s a practical one that compliance teams at exchanges and issuers are already dealing with.
The FSI study didn’t offer a single recommended model. It mapped the terrain. And the terrain is messy, with the US and Singapore pulling toward restriction while Europe and Asia-Pacific markets leave more doors open for issuers willing to jump through regulatory hoops.
Hernández de Cos, for his part, seems to think the whole stablecoin-as-payments argument needs a harder look before it gets further embedded in global financial infrastructure.
Frequently Asked Questions
What did the BIS chief say about stablecoins and payments?
BIS General Manager Pablo Hernández de Cos said stablecoins lack credibility for large-scale payment use and suggested tokenized bank deposits are a more reliable alternative that preserves traditional monetary system foundations.
How do US stablecoin rules compare to Hong Kong and the EU?
The US GENIUS Act restricts payment stablecoin issuers from lending, staking, proprietary trading, and third-party crypto custody, while Hong Kong, the UK, and the EU allow additional activities with proper regulatory authorization, per the FSI study released Thursday.
Why It Matters
The comments from the BIS Chief underscore growing concerns among regulators regarding the viability of stablecoins in mainstream financial systems, particularly as payments become increasingly digitized. The push for tokenized bank deposits reflects a broader trend towards enhancing the stability and security of digital assets, which could reshape the landscape of digital payments and influence regulatory frameworks moving forward. This discussion is particularly significant as policymakers grapple with the implications of cryptocurrency adoption and its integration into existing financial infrastructures.
