Overview
- The Bank for International Settlements released its Annual Economic Report on June 28 and said stablecoins risk fragmenting the global financial system because they do not meet basic standards of money.
- The report estimates the stablecoin market at about $316–320 billion and says more than 99% of fiat‑backed supply is pegged to the U.S. dollar with most issuance concentrated in a few firms such as Tether and Circle.
- BIS says stablecoins fail four key money criteria—singleness, elasticity, interoperability, and integrity—and notes peg drift and slow, frictional redemptions that make tokens unreliable for payments.
- Modeling in the report shows growth of stablecoins to $1–$3 trillion would slightly reduce economic output by draining bank deposits, raising banks’ funding costs, and cutting lending, and it warns of 'stablecoin dollarization' in weaker‑currency countries and harder-to-enforce anti‑money‑laundering checks on permissionless blockchains.
- Instead of seeking bans, BIS urges policymakers to accelerate tokenization of public and bank money on a unified ledger, citing Project Agora as a working prototype while noting central banks remain divided on how to regulate private stablecoins.