BIS Declares Stablecoins Fail as Money, Urges Strict Regulatory Limits

The Bank for International Settlements (BIS) has firmly refuted the notion that stablecoins can function as currency within a contemporary financial system.

In its 2025 Annual Economic Report, the BIS argues that stablecoins fail the fundamental tests of “singleness,” “elasticity,” and “integrity,” criteria that define effective monetary instruments.

Unlike central bank money, which is universally accepted and stable, stablecoins are issued by private entities and often trade at fluctuating rates, undermining their ability to serve as a reliable store of value or medium of exchange.

Financial Crime and Systemic Risk Concerns Intensify

The BIS report highlights the vulnerability of stablecoins to financial crime, particularly when transacted via unhosted wallets on public blockchains.

The lack of robust oversight and the potential for anonymity make stablecoins susceptible to money laundering, sanctions evasion, and terrorist financing.

These risks, the BIS contends, threaten the integrity of the global monetary system and demand urgent regulatory intervention.

Did you know?
The BIS, often called the “central bank for central banks,” was founded in 1930 and plays a pivotal role in shaping global monetary and regulatory policy. Its annual reports are closely watched by financial authorities worldwide.

Elasticity and Monetary Flexibility Remain Elusive

Elasticity, the ability to absorb shocks and meet large-value payment demands, is another area where stablecoins fall short, according to the BIS. Stablecoins require full upfront payment by holders, resembling a strict cash-in-advance model rather than the flexible liquidity provision of modern banking.

This rigidity limits their effectiveness in responding to market stress or facilitating economic growth, further weakening their case as a cornerstone of the monetary system.

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Stablecoins’ Role Should Be Limited and Heavily Regulated

While acknowledging the ongoing demand for stablecoins, especially for cross-border payments and lower transaction costs, the BIS insists their role must be strictly limited and tightly regulated.

The report warns that society must “re-learn the historical lessons about the limitations of unsound money,” urging central banks and public authorities to act decisively.

This stance is likely to influence global regulatory approaches, with several jurisdictions already considering stricter rules for stablecoin issuance and usage.

Tokenization Praised as an Innovation, Not a Replacement

Despite its stern warning on stablecoins, the BIS report praises tokenization as a transformative innovation for the financial system.

Tokenization, the BIS argues, builds on the strengths of current monetary infrastructure and offers new efficiencies, provided it is implemented within the framework of existing regulation.

This nuanced view suggests that while the BIS is wary of privately issued digital currencies, it sees value in leveraging blockchain technology for regulated financial products.