BIS Chief Calls Stablecoins Unfit for Payments, Advocates Tokenized Deposits Instead

Pablo Hernández de Cos doesn’t mince words. The head of the Bank for International Settlements said Friday that stablecoins simply aren’t a viable foundation for large-scale payments — and he’s pushing tokenized bank deposits as the smarter alternative instead.

De Cos made the remarks just before the Jackson Hole symposium on August 28, timing that wasn’t accidental. The BIS had just dropped a study through its Financial Stability Institute examining stablecoin regulations across five major jurisdictions: the U.S., the EU, the UK, Hong Kong, and Singapore. What the study found was a patchwork of rules so inconsistent it’s basically a regulatory mess — significant disparities in how non-bank stablecoin issuers get treated, with some markets applying tight restrictions and others leaving the door pretty wide open.

The gap is real.

The U.S. and Singapore sit on the stricter end, limiting what stablecoin issuers can do — no lending, no staking. The EU, UK, and Hong Kong are more lenient, allowing those activities with the right authorizations in place. That kind of inconsistency across major financial centers creates obvious arbitrage opportunities. And the BIS isn’t happy about it.

Tokenized Deposits vs. Stablecoins

The BIS’s preferred model — tokenized bank deposits — works differently from a stablecoin. They function like traditional bank deposits but circulate digitally, staying inside the existing banking system and under the regulatory frameworks already built around it. Stablecoins, by contrast, are mostly issued by private companies and backed by reserves that aren’t always subject to the same scrutiny. That’s the core tension de Cos keeps coming back to: stablecoins lack the guarantees that large-scale financial transactions probably need.

It’s worth noting the U.S. is moving in a different direction. American authorities are actively working on a regulatory framework that would integrate stablecoins into the financial system rather than sideline them. The U.S. Treasury has gone further, suggesting stablecoins could actually boost demand for U.S. bonds and strengthen the dollar’s global position. That’s a pretty sharp contrast to what the BIS is saying — and it puts the two camps on a collision course.

The BIS isn’t dismissing stablecoins entirely. De Cos acknowledged they could help support public debt demand. But he thinks the risks outweigh the benefits.

Read also: BIS Chief Slams Stablecoins as Unfit for Payments, Advocates for Tokenized Bank Deposits

Banking Sector Risk and Fragmented Payments

Here’s the bigger worry the BIS keeps raising: if deposits start migrating from banks to stablecoins at scale, banks lose a critical funding source. They’d have to turn to market borrowing to fill the gap — which costs more. And those higher costs get passed along. Households pay more for mortgages. Businesses pay more for loans. The downstream effects on the broader economy could be significant, even if they play out slowly.

And that’s not the only problem. Stablecoins tend to create fragmented payment ecosystems. Different platforms, different stablecoins, limited interoperability between them — it all adds friction and cost. Transitioning between platforms isn’t smooth. And when you’re trying to enforce anti-money laundering rules across borders, that fragmentation makes an already hard job much harder. International coordination on AML basically becomes a nightmare when payment rails don’t talk to each other.

One regulatory gap the BIS study flagged specifically: most jurisdictions focus oversight on the issuing company itself rather than the entire corporate group it belongs to. For large issuers with complex structures, that’s a loophole. Group-level oversight, the BIS says, would probably be more effective.

De Cos, the ECB, and What Comes Next

The political dimension here can’t be ignored. De Cos is reportedly seen as a candidate for the European Central Bank’s top job, with Christine Lagarde’s term up in 2027. If he lands that role, his cautious stance on stablecoins could shape eurozone digital currency policy for years. Europe is already heading in a direction that seems aligned with his views — the ECB is developing a digital euro, an effort to bring digital currency into the existing financial framework with proper oversight rather than letting private stablecoin issuers fill the vacuum.

Whether that project fully addresses the interoperability and AML challenges the BIS keeps flagging is unclear. The digital euro is still in development, and the details of how it handles cross-border transactions and regulatory compliance aren’t fully settled yet.

More context: Jackson Hole Symposium Marks Historic First for Stablecoins on Feds Agenda

Back to the core issue: the BIS study found that even jurisdictions with stricter rules tend to focus on the issuer entity rather than the broader corporate structure. For Tether, Circle, or any large issuer operating through multiple subsidiaries, that’s a meaningful gap. The BIS wants that closed.

De Cos put his position on the table before Jackson Hole. Stablecoins aren’t ready. Tokenized deposits are the safer path. The U.S. disagrees. And the gap between those two positions is probably going to define the next phase of global digital currency regulation.

The BIS study covered five jurisdictions. The divergence it found runs deeper than most expected.