BIS warns stablecoins could weaken monetary policy

The Bank for International Settlements (BIS) has warned that the accelerating expansion of the stablecoin market, currently estimated at around $316 billion, could fragment the global monetary system and weaken the control of national monetary authorities, Cointelegraph reported. The BIS pointed out that stablecoins lack the institutional framework to support the safety and reliability required for them to become a large-scale payment method. It also highlighted the potential for poor management of reserve assets and a reduction in banks' capacity to lend to the real economy if deposits shift to stablecoins. The report specifically noted that the spread of U.S. dollar stablecoins in countries with weaker currencies could undermine monetary sovereignty and the effectiveness of monetary policy, increasing the risk of volatile cross-border capital flows for emerging economies. The BIS added that open blockchains like Bitcoin and Ethereum have limitations in scalability, legal accountability, and payment finality that make them unsuitable as a foundation for financial infrastructure. As an alternative, it proposed a "unified ledger" structure that would tokenize central bank money, commercial bank deposits, and financial assets within a regulatory-compliant framework, suggesting this could achieve both payment modernization and monetary stability.