Catenaa, Wednesday, June 25, 2025-The Bank for International Settlements (BIS) has sounded its sharpest warning yet over stablecoins, urging global financial authorities to accelerate the tokenization of official currencies to safeguard monetary sovereignty and financial stability.
In a pre-released chapter of its annual report, BIS said stablecoins, digital tokens typically pegged to the US dollar and backed by assets like Treasuries or gold “fall short” as sound money.
It also flagged systemic risks such as potential capital flight from emerging economies, threats to transparency, and the erosion of central banks’ control over national currencies.
BIS economic adviser Hyun Song Shin likened stablecoins to 19th-century private banknotes, warning they could fluctuate in value and fail to uphold the uniformity guaranteed by state-backed money.
He cited the collapse of TerraUSD in 2022 as a cautionary tale.
The warning comes days after the U.S. Senate passed legislation to establish a federal framework for dollar-pegged stablecoins, a move expected to bolster adoption. Currently, dollar-based stablecoins make up over 99% of the $260 billion global market, led by issuers like Tether.
The BIS also expressed concern about disclosure and asset quality, with Deputy General Manager Andrea Maechler questioning the verifiability of stablecoin reserves.
To counter such risks, BIS is advocating for a tokenized “unified ledger” system that integrates central bank reserves, commercial deposits, and government bonds into a programmable, transparent digital platform.
Outgoing BIS chief Agustin Carstens called for “bold action,” stressing that only central banks can ensure trust, resilience, and systemic oversight in the evolving digital monetary ecosystem.
