In a direct and sobering message to the financial world, the Bank for International Settlements (BIS) has delivered a stark warning about the role of stablecoins in the global financial system. The message, revealed in the BIS’s annual economic report, critiques stablecoins not only for their lack of true utility but also for the systemic risks they pose when promoted as substitutes for regulated national currencies.
The BIS — often dubbed the “central bank for central banks” — released this warning amid growing scrutiny over digital assets and a mounting global race among central banks to issue their own digital currencies (CBDCs). According to the report, stablecoins have failed to deliver meaningful innovation or real-world economic value, despite their rapid growth and adoption in cryptocurrency markets.
A Red Flag from the BIS
The BIS explicitly states that stablecoins are “not fit” to serve as the foundation of a modern monetary system. Despite being pegged to fiat currencies like the US dollar, stablecoins remain outside the conventional financial safeguards that govern traditional banking and payment systems. As a result, the BIS asserts they introduce more instability than value.
Agustín Carstens, General Manager of the BIS, emphasized that even the most popular stablecoins have failed to maintain consistent value or efficiency in payments. “They do not benefit from the regulatory and institutional frameworks that underpin the credibility of sovereign money,” he remarked.
The BIS’s conclusions are rooted in detailed assessments of how stablecoins have been used in real-world applications — primarily in speculative crypto trading rather than productive financial activity.
A Central Bank Response: Embrace of CBDCs
The report does more than critique; it outlines a clear direction for how central banks should respond: by accelerating the development of central bank digital currencies (CBDCs). These digital currencies, unlike stablecoins, would be state-backed, ensuring safety, stability, and integration within established regulatory systems.
So far, over 40 jurisdictions are at various stages of exploring or piloting CBDCs. The BIS sees this as a critical opportunity to modernize money for the digital age without compromising financial stability or security.
Notably, the BIS also revealed the launch of a new initiative, “Project Promissa,” aimed at digitizing and streamlining the management of promissory notes — traditional instruments used in international financial cooperation. This digital transformation effort will include collaboration with the Swiss National Bank and the World Bank.
Stablecoins: Hype Without Utility?
The BIS report casts doubt on the claims made by stablecoin advocates who argue that these tokens are necessary for cross-border payments, financial inclusion, or inflation hedging. In practice, the BIS found that stablecoins are used almost exclusively within the crypto ecosystem itself — not for buying goods or services or improving financial inclusion.
Additionally, BIS research shows that most stablecoins suffer from low transparency and are susceptible to runs, similar to traditional unregulated financial instruments. Several incidents, including the high-profile collapse of TerraUSD in 2022, serve as cautionary tales supporting the BIS’s position.
Even the more prominent and relatively stable tokens like USDT (Tether) and USDC have shown episodes of instability and concern over their reserves and backing.
The Global Regulatory Imperative
As digital finance evolves, the BIS insists that regulators must not allow a parallel monetary system to take hold without supervision. The group underscores the importance of “same risk, same regulation” principles being applied consistently to stablecoins, crypto exchanges, and other digital financial products.
International financial bodies — including the IMF, World Bank, and G20 — have echoed similar concerns, pushing for stronger oversight, cross-border regulation, and global standards in the emerging digital asset space.
The BIS also noted that a fragmented regulatory approach would only exacerbate risks, making a strong case for coordinated international action.
Conclusion: A Watershed Moment for Digital Finance
The BIS’s 2025 warning may be remembered as a turning point in the digital currency debate. Rather than relying on privately-issued stablecoins to drive financial innovation, the world’s central banks appear poised to assert more control through the issuance of sovereign digital currencies.
For investors, innovators, and regulators alike, the message is clear: stability must come before speed, and the credibility of money should not be compromised for the sake of technological experimentation.
As CBDC research and pilots continue to accelerate, stablecoin issuers will face mounting pressure to prove their worth — or risk being regulated into irrelevance.
