The Bank for International Settlements published its Annual Economic Report on June 23, with a dedicated chapter arguing that stablecoins lack the fundamental monetary properties required to function as reliable payment instruments. The core problem, according to the BIS, is something called “singleness,” which is the ability to be redeemed at par with central bank money.
Chapter III of the report, co-authored by Frank Smets and Gaston Gelos, lays out a methodical case against the current architecture of stablecoins. Gelos, who serves as the BIS Deputy Head of the Monetary and Economic Department, put it bluntly in a Reuters podcast: stablecoins and other tokens depend on the stability that central banks provide in order to function smoothly.
The report identifies four structural deficiencies in stablecoins operating on public, permissionless blockchains. First, redeemability: the ability to actually cash out at face value isn’t always guaranteed. Second, liquidity elasticity, meaning stablecoins can’t expand or contract their supply in response to market stress the way central bank money can. Third, interoperability between different stablecoin ecosystems remains fragmented. And fourth, resilience against financial crime on open blockchains remains a persistent vulnerability.
The BIS warns that widespread adoption of USD-denominated stablecoins could undermine monetary sovereignty in emerging markets. The report also flags potential disruptions to traditional banking. If depositors shift funds from bank accounts into stablecoins, banks lose a critical source of cheap funding, which could constrain credit provision. The BIS projects that the overall impact on economic growth would be modest.
The BIS proposes an alternative framework built around a “unified ledger.” The idea is to take the technological benefits of tokenization, programmability, atomic settlement, and composability, and embed them within the existing two-tier monetary system. Under this model, tokenized central bank reserves would sit at the foundation of the system, providing the same singleness guarantee that stablecoins currently lack. Commercial banks and other regulated entities would issue tokenized deposits and payment instruments on top of those reserves.
The report cites Project Agora as an example of this approach in action. Agora is a BIS innovation hub initiative exploring public-private collaboration on cross-border payments. The BIS also advocates for coordinated regulatory measures targeting existing stablecoins.