No Questions Asked: BIS says stablecoins fall short as money while the US rules out the alternative
The Bank for International Settlements (BIS) has published Chapter III of its 2026 Annual Economic Report, offering their view of stablecoins as monetary instruments, concluding that current designs "fall short on foundational properties of money."
The BIS examines the macro-financial implications of stablecoin adoption and sets out the BIS's preferred path for digital money. The findings arrive just days after the US Senate passed legislation prohibiting the US Federal Reserve from issuing a central bank digital currency (CBDC) until the end of 2030, highlighting a sharp divergence in how major jurisdictions are approaching the future of money.
What stablecoins are — and are not
The BIS assessed the approximately US $320 billion stablecoin market and identified what they say are three core structural deficiencies in current stablecoin arrangements:
secondary market prices of stablecoins deviate from their pegged value, indicating to the BIS they behave more like exchange-traded fund (ETF) shares than means of payment;
redemption frictions constrain stablecoin use as a reliable payment instrument; and
stablecoins circulate on public permissionless blockchains that are fragmented across competing networks, undermining interoperability which the BIS believes is required to sustain the network effects of money.
The BIS frames its analysis around the concept of money being accepted on a "no questions asked" basis. Stablecoins, the report concludes, cannot guarantee that standard because they do not settle on central bank balance sheets, cannot ensure par exchange across issuers and blockchains under all conditions, and are burdened by fragmentation across a growing array of competing layer 1 and layer 2 networks. In short, the BIS assumes that without a central bank balance sheet ultimately being linked to a means of payment (even under a fractional reserve system) that means of payment lacks a high enough standard.
The report also raised the usual claims of financial integrity with hand-wringing over privacy and pseudonymity and the availability of unhosted wallets know-your-customer and AML/CFT compliance without much analysis given to the incredibly trackable nature of public blockchains.
Stablecoin dollarisation
For emerging market and developing economies, the BIS identified a distinct concern it terms "stablecoin dollarisation": a pattern in which residents of jurisdictions with weaker domestic currencies increasingly hold US dollar-pegged stablecoins as a store of value or for remittances.
The report notes this trend tracks traditional financial dollarisation, driven by macroeconomic instability, and warns a growing use of US dollar stablecoins may erode monetary sovereignty, reduce the effectiveness of domestic policy tools and increase exposure to volatile cross-border capital flows.
Notably, capital controls have had limited effect, as the report states:
While deposit dollarisation has been lower in economies with approval requirements on domestic foreign currency deposits, inflows into stablecoins have been broadly similar in economies with or without restrictions on stablecoin use between residents and non-residents.
The BIS's preferred architecture
Rather than improving private stablecoins into more money-like instruments, the BIS recommends a "unified ledger" architecture: a system of interoperable networks integrating tokenised central bank reserves, tokenised commercial bank deposits and other appropriately supervised private monies with tokenised assets.
Project Agorá, a cross-border payment prototype involving eight central banks and over 40 regulated institutions, is cited as a working demonstration of the approach. Legal analysis of the project found that tokenisation does not change the nature of deposits or reserves and that settlement finality can be aligned with national frameworks.
The BIS is not arguing that private stablecoin regulation is futile. It acknowledges that "money-like stablecoins" could achieve par redeemability at all times if backed by high-quality liquid asset reserves with access to credible liquidity backstops. Where on the design spectrum any particular stablecoin falls depends on reserve composition, redemption conditions and the regulatory framework governing issuance.
The US takes the other road
On 22 June 2026, the US Senate passed the 21st Century ROAD to Housing Act with an 85-5 vote. Tucked within the housing affordability legislation is a provision prohibiting the Federal Reserve from issuing, creating or circulating a CBDC through 31 December 2030. The ban gives statutory force to an executive order signed by President Trump in January 2025 that had already directed his administration to take no steps toward launching a CBDC, instead with the GENIUS Act, which became law in mid-2025, establishing a licensing and supervision regime for private payment stablecoin issuers.
The US approach amounts to closing the public route to digital central bank money; licensing and regulating private stablecoins and allowing market competition to do the rest.
The BIS's preferred architecture runs in the opposite direction. It would bring tokenisation into the existing two-tier monetary system anchored in central bank money, not replace central bank money's role with private instruments. The EU, which is mid-way through MiCA implementation with a MiCA 2 consultation on the horizon, sits closer to the BIS position: cautious on private stablecoins, active on central bank digital infrastructure.
The recent enforcement wave following Binance's MiCA exit reflects a regime designed to contain, rather than cede ground to, private issuers.
What NXT?
Businesses and practitioners operating in digital asset markets should:
assess how the BIS's stablecoin design spectrum (money-like versus investment instrument) applies to any product they issue or distribute, particularly regarding par redeemability, reserve quality and redemption conditions;
monitor the GENIUS Act implementing rules (currently in proposed form from FDIC, Treasury and FinCEN/OFAC, with comment periods running through mid-2026) for compliance requirements affecting payment stablecoin issuers operating in or serving US customers;
review AML/CFT programs in light of the BIS's financial integrity findings, particularly in relation to unhosted wallet exposure and cross-chain transaction monitoring; and
for businesses with exposure to emerging markets, assess whether stablecoin dollarisation risks affect the regulatory treatment of their products in those jurisdictions.
Private stablecoin issuers now occupy a valuable space between two competing institutional visions: a US framework that favours private money, and the BIS pushing for government CBDC. By Michael Bacina
