BIS warns stablecoins need structural improvement

The Bank for International Settlements (BIS) has issued one of its strongest warnings yet on the risks posed by stablecoins, arguing that their current structure falls short of the core characteristics required of money and could threaten financial stability if adopted at scale.

BIS Warns stablecoins need structural improvement

In a special chapter of its Annual Economic Report 2026, the BIS acknowledges that digital innovation and tokenisation have the potential to modernise payments and financial markets. However, it argues that the future monetary system should build on the existing two-tier banking model—where central banks provide the monetary anchor and commercial banks deliver financial services—rather than replacing it with privately issued stablecoins.

Stablecoins Face Structural Challenges

According to the report, stablecoins demonstrate some of the technological advantages of tokenisation, including faster settlement and programmable payments. However, the BIS argues that they continue to suffer from fundamental structural weaknesses.

Chief among these is the lack of “singleness”—the principle that different forms of money can always be exchanged at par with central bank money. The report also highlights concerns over resilience, interoperability between blockchain networks, financial crime controls and the ability to guarantee redemption under periods of market stress.

While the BIS believes the overall economic impact of stablecoins could remain modest in the near term, widespread adoption could significantly alter bank funding models, reduce deposits available for lending and create broader risks for financial stability.

The report also warns that the growing dominance of US dollar-backed stablecoins could increase capital flow volatility and weaken monetary sovereignty, particularly in smaller economies with less resilient financial systems.

Tokenisation Remains Central to the Future

Despite its criticism of stablecoins, the BIS is strongly supportive of tokenisation itself.

Rather than developing parallel monetary systems, the institution argues that tokenised commercial bank deposits and central bank money should coexist within a common programmable infrastructure capable of supporting instant, programmable financial transactions.

Pablo Hernández de Cos, General Manager of the BIS, said digital innovation should be integrated into the existing financial architecture to preserve trust while unlocking greater efficiency.

The report argues that achieving this vision will require close cooperation between central banks, regulators and the private sector at both domestic and international levels.

Project Agorá Offers an Alternative Vision

As an illustration of this approach, the BIS points to Project Agorá, its wholesale cross-border payments initiative involving eight central banks and more than 40 regulated financial institutions.

The project is built around a unified ledger that combines tokenised commercial bank deposits with jurisdiction-specific ledgers representing tokenised central bank reserves. According to the BIS, this architecture could deliver many of the benefits associated with blockchain technology—including programmability, faster settlement and greater efficiency—without compromising monetary stability or public trust.

As policymakers around the world develop regulatory frameworks for stablecoins and digital assets, the BIS has drawn a clear distinction between embracing technological innovation and redesigning the foundations of money itself. Its message is that tokenisation should strengthen today’s financial system, not replace the institutions and safeguards that underpin confidence in it.