Stablecoins fail payment credibility test, BIS says

Stablecoins do not yet credibly function as a payment method at scale, Bank for International Settlements General Manager Pablo Hernández de Cos said on Aug. 28 at the Federal Reserve’s Jackson Hole symposium. Summary BIS chief Pablo Hernández de Cos said stablecoins cannot credibly support payments at scale today. Tokenized deposits preserve settlement in central bank money, making them preferable for payments, de Cos. Five major jurisdictions differ over which entities may issue stablecoins and conduct additional financial activities. U.S. rules require payment stablecoins to maintain one-for-one reserves using cash and eligible short-term assets. Stablecoin issuers’ Treasury purchases could lower government borrowing costs while increasing banks’ marginal funding expenses. In his official BIS speech, de Cos argued that tokenized bank deposits provide a stronger route to programmable payments. They remain within the existing banking system and settle through central bank money. “Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos said. However, he did not call for a complete ban on stablecoins. He said st...