BIS and stablecoin issuers debate digital payment models

A debate has emerged between international financial regulators and stablecoin issuers regarding the suitability of digital assets for large-scale payments.

At the Jackson Hole Symposium, Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), argued that stablecoins lack the necessary credibility, uniformity, and interoperability to function as money at scale. He highlighted structural deficiencies, specifically noting issues regarding par-redeemability and elasticity, which are essential for maintaining stability during market stress. The BIS also warned of risks such as digital dollarization, potential bank runs, and regulatory fragmentation across the US, EU, UK, Hong Kong, and Singapore, which may encourage regulatory arbitrage.

To preserve the ‘singleness’ of money and monetary sovereignty, the BIS advocates for tokenized deposits that remain liabilities of commercial banks. In response, Tether CEO Paolo Ardoino defended stablecoins, asserting that fully reserved assets held in liquid holdings like U.S. Treasuries offer a safer alternative for savers than fractional reserve banking.

Recent data from Anchorage Digital Bank indicates that Tether’s U.S.-regulated stablecoin, USA₮, maintained a surplus of approximately $660,000 as of July 31. The reserves for the 175.25 million USA₮ tokens in circulation consist of U.S. dollar cash and reverse repurchase agreements secured by U.S. Treasuries.