BIS Report Challenges Stablecoins' Viability as Money

The Bank for International Settlements (BIS) has released a report challenging the viability of stablecoins as a form of money in the modern financial system. According to the BIS Annual Economic Report 2025, stablecoins fail to meet three critical criteria that define effective monetary instruments: singleness, elasticity, and integrity.

The BIS described stablecoins as "digital bearer instruments" that resemble financial assets more than actual money. The report highlighted that stablecoins perform poorly when assessed against the three tests for serving as the mainstay of the monetary system. Unlike central bank-backed money, which is accepted at par and requires no background checks, private entities issue stablecoins and often trade at fluctuating rates. This undermines the core principle of monetary singleness, the report claimed.

Elasticity, the second test, is crucial for absorbing shocks and meeting large-value payment demands. The BIS pointed out that any additional supply of stablecoins requires full upfront payment by its holders, likening it to a "strict cash-in-advance setup" that contrasts with the flexibility of modern banking systems, where central banks provide liquidity as needed.

The third and perhaps most damning failure lies in the area of integrity. The report claimed that stablecoins’ design, especially those transacted via unhosted wallets on public blockchains, makes them prone to financial crime. "Stablecoins have significant shortcomings when it comes to promoting the integrity of the monetary system," the BIS noted, emphasizing their vulnerability to money laundering, sanctions evasion, and terrorist financing.

While acknowledging the continued demand for stablecoins due to features like cross-border accessibility and lower transaction costs, the BIS argued that they should only play a limited, well-regulated role. "Society can re-learn the historical lessons about the limitations of unsound money," the report cautioned. "Bold action by central banks and other public authorities can push the financial system along the right path, in partnership with the financial sector."

Despite its hard take on stablecoins, the BIS report praised tokenization as a "transformative innovation" for the next-generation monetary and financial system. It said tokenization builds on the current financial system rather than replacing it. Some in the crypto community said it is "no surprise" that the BIS paper was generally negative on stablecoins, given that it is a "regulatory body owned by global central banks."

Jim Walker, chief economist at Aletheia Capital, wrote, "The BIS is hysterical in its opposition to crypto. The first criterion, backed by a central bank, should make it a laughing stock given the historical failures of those institutions around the world."