Global financial institutions are accelerating their stablecoin development, even as the Bank for International Settlements (BIS) expresses significant reservations about their utility and potential risks. This divergence in strategy came into sharp focus on August 28, 2026, when BIS General Manager Pablo Hernández de Cos publicly questioned stablecoins at the Jackson Hole Economic Symposium.
De Cos argued that a framework centered on tokenized deposits appears far more promising for modern digital payments. Central banks, including the BIS, view tokenized deposits as the backbone for an on-chain economy that preserves the existing monetary system.
BIS General Manager Challenges Stablecoin Foundation
Pablo Hernández de Cos, speaking at the prestigious Jackson Hole Economic Symposium in Wyoming, asserted that stablecoins simply don’t function credibly as a large-scale means of payment. He instead championed tokenized deposits, stating they offer “a more direct path to harness tokenisation while preserving the monetary system’s foundations.”
De Cos underscored three critical attributes he believes money must possess: singleness, interoperability, and financial integrity. He argued that stablecoins fall short on all three counts, presenting examples of their inherent fragilities.
For instance, the BIS General Manager pointed out that exchanging different stablecoins, such as Tether’s USDT to Circle’s USDC, can lead to price fluctuations. This means the final value of a transfer might not align with one US dollar, undermining the expectation of a one-to-one exchangeability. Circle’s USDC has gained considerable traction in various sectors, yet such issues persist.
Interoperability also remains a significant hurdle. Most fiat-pegged stablecoins operate on fragmented public, permissionless blockchains, making transfers between different chains complex and often costly. This creates friction rather than seamless transactions.
The third major concern raised by De Cos was financial integrity. He highlighted a growing trend of stablecoins held in self-custodied wallets, with an increasing number of transfers occurring on-chain without essential know-your-customer (KYC) checks. This contrasts sharply with traditional banking, where deposits are inherently transparent and less anonymous.
Regulatory Warnings and Economic Risks
The BIS has consistently articulated concerns that stablecoins could pose substantial risks to financial stability and monetary sovereignty, especially if left unregulated. These warnings aren’t new; the June 2026 Annual Economic Report from the BIS reiterated that stablecoins fail to meet fundamental properties of money, threatening overall financial integrity.
One primary worry is the potential for “fire sales” of safe assets should stablecoins continue their rapid growth, creating systemic financial instability. Another critical issue is “stablecoin dollarization” in emerging economies. The widespread adoption of US dollar-pegged stablecoins could undermine domestic monetary policy and reduce national monetary sovereignty, a phenomenon the BIS suggests is “hard to reverse once established.”
Moreover, the shift of funds from conventional bank deposits into stablecoins could escalate bank funding costs. These increased costs might then be passed on to households and businesses through higher borrowing rates, impacting broader economic activity. The argument underlines the BIS’s preference for digital payments solutions that maintain existing financial structures.
Data from a January 2026 white paper by Boston Consulting Group (BCG) and blockchain data company Allium appears to support some of these concerns regarding real-world usage.
While public blockchains facilitated over $62 trillion in stablecoin transactions within a year, only about $4.2 trillion, or roughly 7% of the total, constituted actual payments within the real economy. The paper noted that the market capitalization of stablecoins reached $307 billion by December 2025.
Banks Forge Ahead with On-Chain Initiatives
Despite these clear warnings from the BIS, major banks are not only exploring but actively advancing their stablecoin and tokenized deposit projects. This strategic pivot is largely seen as a defensive move, aimed at competing with crypto-native issuers like Tether and Circle, and preventing a significant outflow of customer deposits.
A consortium of over a dozen global banks, including prominent names like Bank of America, Wells Fargo, Santander, Citi, Goldman Sachs, and UBS, is reportedly preparing to issue its own stablecoin on public blockchains. This collective effort suggests a concerted strategy to enter the digital asset space on their own terms for stablecoin payments.
Initial plans indicate a dollar-pegged token, with potential expansion to other G7 currencies.
This push by traditional finance is also influenced by legislative changes, such as the GENIUS Act, implemented on July 18, 2025. This legislation granted banks federal-level access through OCC-approved subsidiaries, although it explicitly prohibited interest payments to stablecoin holders.
Bank of America CEO Brian Moynihan has previously warned that up to $6 trillion in deposits could leave banks if stablecoin issuers were permitted to offer yield, highlighting the competitive pressure.
Community banks are also joining the movement. Thirty-nine state bankers’ associations formed the BankChain Alliance, targeting a 2027 launch. This initiative aims to provide community banks a shared pathway into tokenized deposits and stablecoins, reducing their reliance on existing crypto platforms. The alliance represents 3,283 banks with combined assets of $21.8 trillion, signaling a broad institutional commitment.
Tokenized Deposits Versus Stablecoins: A Structural Divide
The core of the BIS’s argument rests on a fundamental distinction between stablecoins and tokenized deposits. Tokenized deposits are digital representations of traditional commercial bank deposits on a programmable ledger, with a direct claim on the issuing bank and backed by the bank’s deposit liability. Their settlement processes typically involve central bank accounts, ensuring par redemption and finality.
Stablecoins, conversely, are digital tokens designed to maintain a stable value against an asset, usually the US dollar, and are issued by private entities. Their backing often relies on reserves like cash or Treasuries, but secondary market prices can still deviate from par. The BIS champions tokenized deposits for the bulk of day-to-day payments and wholesale settlement, relegating stablecoins to more specialized uses.
The operational models also differ significantly in terms of oversight. Tokenized deposits are inherently account-based and integrated within supervised banking infrastructure, facilitating anti-money laundering (AML) and counter-terrorist financing (CFT) compliance. Stablecoins, with their potential for pseudonymous wallets and self-custody, present greater challenges for regulatory enforcement. The underlying KYC framework thus remains a point of contention.
Interestingly, some major players are carefully navigating this landscape. While many banks are exploring stablecoin issuance, JPMorgan has publicly stated it currently has no plans to issue a stablecoin, focusing instead on its deposit-token model and other bank tokenization projects. This highlights the varied approaches within the banking sector to integrate blockchain technology.
The Evolving Digital Currency Landscape
This juxtaposition of caution from central banking authorities and aggressive innovation from commercial banks marks a critical juncture for the future of digital currency. The BIS, through figures like Pablo Hernández de Cos, is clearly advocating for a structured, bank-centric approach to digital payments, emphasizing financial stability and regulatory oversight.
However, the commercial banking sector sees an undeniable need to adapt and compete in a rapidly evolving digital economy. Their embrace of stablecoin initiatives, whether through consortiums or individual projects, reflects a strategic imperative to retain market share and cater to changing consumer and business demands. The coming years will reveal how these two powerful forces shape the global digital payment landscape.