The Bank for International Payments (BIS), which is skeptical of Bitcoin (BTC) and cryptocurrencies, shares no different view regarding stablecoins.
According to Reuters, BIS Managing Director Pablo Hernandez de Cos expressed his concerns about stablecoins while speaking at a Bank of Japan (BOJ) seminar in Japan.
BIS Director General Cos stated that dollar-denominated stablecoins like Tether (USDT) and USDC are by nature more similar to exchange-traded funds (ETFs) than to cash. Cos warned that stablecoins are closer to investment products than cash and could pose a significant threat to financial stability if they continue to grow.
Cos specifically stated that the current structure of dollar-indexed stablecoins, such as USDT and USDC, is not suitable for use as a payment method and does not meet the necessary requirements.
The BIS director general also added that because stablecoin issuers’ reserves consist of short-term government bonds and bank deposits, market instability could lead to large capital outflows and subsequent chain reactions.
“Because the reserve assets held by stablecoin issuers consist of short-term government bonds or bank deposits, in stressful situations, if large-scale repayment demands arise, they may be forced to urgently sell these assets or put pressure on banks’ financing conditions.”
Finally, Cos emphasized the need for global cooperation on regulation, adding that if dollar-indexed stablecoins grow large enough to compete with fiat currencies, it could have a negative impact on both financial stability and global economic policy.
*This is not investment advice.
