BIS stablecoins warning: tokens raise emerging-market risks

More than 99 per cent of fiat-backed stablecoins are pegged to the US dollar, the Bank for International Settlements said in its 2026 annual report. The central-bank forum said that concentration is one reason privately issued dollar tokens still fail the money tests that matter: settling at par, expanding with demand and keeping illicit finance out of the system.

The chapter puts a harder edge on the official case against stablecoins as the market keeps growing. The BIS valued the sector at about $320 billion at end-May in its annual report chapter on stablecoins and tokenisation, with dollar-linked coins accounting for nearly all supply. The warning is not really about crypto trading. It is about whether a large pool of private digital dollars could compete with bank deposits and local currencies.

The BIS framed the issue around three old monetary tests. Singleness means one unit of money trades at par with another. Elasticity is the system’s ability to create settlement balances when demand jumps. Integrity covers anti-money-laundering controls, sanctions screening and legal finality. Stablecoins fall short, the BIS said, because their par value rests on the issuer, their supply follows reserves and token demand, and compliance standards vary by jurisdiction.

Pablo Hernández de Cos, the BIS general manager, made the point in plainer language in remarks reported by Reuters in April:

“In this respect, they currently operate more like exchange-traded funds (ETFs) than like money”

Pablo Hernández de Cos, Reuters

That ETF comparison moves the debate away from reserve disclosures alone. A token can be redeemable, tradable and tightly supervised, and still not serve as an anchor for the monetary system. The BIS is asking whether private issuers should sit that close to everyday settlement in the first place.

What worries emerging markets

The report’s sharpest warning is aimed at emerging market and developing economies. If households or firms begin to hold dollar stablecoins instead of local bank deposits or cash, the BIS said, domestic authorities could lose visibility over payments. Funding could leave the banking system. Exchange-rate pressure could build faster in a stress episode.

A household moving savings into a dollar token can look like an ordinary payments choice. At the policy level, though, it can drain deposits, weaken transmission of domestic interest-rate moves and shift more commerce into a private unit tied to the Federal Reserve’s currency. That is the digital-dollarisation channel the BIS wants regulators to take seriously.

Market concentration makes the channel more sensitive. Reuters reported that Tether’s USDT and Circle’s USDC account for about 85 per cent of stablecoin circulation, which reinforces the BIS concern that the sector is effectively a private extension of the dollar zone. The BIS tested wider-adoption scenarios of $1 trillion, $2 trillion and $3 trillion in stablecoins, arguing that a bigger footprint could amplify capital-flow volatility and weaken monetary sovereignty in countries with less credible domestic currencies.

Hernández de Cos also warned that fragmented national rules could create new fault lines as adoption rises. “Without it, divergent regulatory frameworks for stablecoins across jurisdictions could lead to severe market fragmentation or enable harmful regulatory arbitrage,” he said in the same Reuters interview. That is why the annual report reads as a regulatory brief as much as a technical chapter.

What the BIS wants instead

The BIS is not rejecting tokenisation outright. Its report says digital settlement can still improve payments if central-bank money remains the anchor and commercial-bank claims move on chain inside a consistent legal framework. The preferred model is tokenised central-bank reserves, commercial-bank money and a unified ledger, not a parallel payments rail built around private dollar tokens.

That leaves a clear gap between central-bank orthodoxy and much of the crypto-policy debate. Stablecoin issuers have spent the past year arguing that better reserves, disclosures and supervision can make the sector safer. The BIS answer is narrower: even a well run stablecoin may still fall short of what money needs to do. The report arrives as global officials push for closer stablecoin coordination, so the intervention is no academic footnote. For issuers such as Tether, and for governments deciding whether to accommodate digital dollars, the fight is now about who gets to supply money.