BIS Warning…Stablecoins “Could Become the Fuse for a Financial Crisis”

▲ Stablecoin ©Godasol

With the Bank for International Settlements (BIS) warning that dollar stablecoins could shake the financial system, global efforts to strengthen regulation are gaining momentum.

According to investment media FXStreet on April 20 (local time), the Bank for International Settlements (BIS) warned that dollar-based stablecoins could have a significant impact on financial stability and monetary policy if they approach the scale of traditional currencies.

Pablo Hernandez de Cos, BIS General Manager, pointed out at a Bank of Japan seminar that the current stablecoin structure has limitations for widespread use as a payment method. He analyzed that major dollar stablecoins such as Tether (USDT) and USD Coin (USDC) are closer to investment products than cash due to characteristics such as price disparities and redemption conditions.

He emphasized that while stablecoins have a structure similar to exchange-traded funds, they hold short-term government bonds and bank deposits as reserve assets. Therefore, if large-scale fund outflows occur during market instability, it could trigger bank liquidity pressure and a chain of risks.

He also pointed out that transaction structures based on public blockchains and non-custodial wallets create areas that bypass anti-money laundering regulations, and without separate regulatory mechanisms, there is a high possibility of them being exploited for illegal activities.

Europe and major countries are also stepping up their responses. The European Union is considering restricting the use of non-euro stablecoins for everyday payments, while the UK and Switzerland are also examining the possibility of bank deposit outflows and financial instability, alongside efforts to reorganize their regulatory frameworks.

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