BIS warns stablecoins risk fragmenting global financial system
The BIS warned that stablecoins are growing fast enough to fragment the global monetary system, weaken sovereign control over money, and shift funding away from banks. In its Annual Economic Report, it argued that fiat-pegged tokens lack the institutional safeguards needed to function as safe money at scale, especially because reserve management and redemption structures can be fragile. It also said that widespread movement from bank deposits into private digital tokens could reduce bank lending to the real economy. The BIS highlighted “stablecoin dollarization” in weaker-currency economies as a major risk, since dollar-linked tokens could undermine domestic monetary policy, bank intermediation, and expose countries to volatile cross-border capital flows. It also gave a strong critique of public permissionless blockchains, saying they face structural limits on scalability, governance, accountability, and settlement finality. As an alternative, it promoted tokenized central bank money and tokenized commercial bank deposits on regulated platforms, within a “unified ledger” framework that preserves monetary stability while enabling faster, programmable payments.
