Anchoring trust in money: innovation beyond stablecoins
Bank for International SettlementsThe BIS's flagship annual report argues that stablecoins as currently designed fail to deliver the singleness, elasticity, and integrity of money, and that the path forward is tokenizing central bank and commercial bank money on unified ledgers rather than relying on private stablecoins.
Key findings
- Stablecoins operate without the institutional underpinnings — central bank backing, guaranteed par redeemability, and an elastic supply of liquidity — that give money its singleness.
- Stablecoins on permissionless chains, with pseudonymity and unhosted wallets, create AML/CFT and financial-integrity gaps and regulatory-arbitrage risk.
- Fragmentation across multiple blockchain networks undermines the interoperability and network effects needed for money-like functionality.
- Modeling suggests the net macroeconomic effect of widespread stablecoin adoption is modest, but reserve composition matters: government-bill holdings pose different financial-stability risks than bank deposits or central bank reserves.
- In emerging markets, foreign-currency stablecoin adoption threatens monetary sovereignty and can erode the domestic currency's unit-of-account role if substitution deepens from store-of-value into transaction settlement.
- The recommended path is to integrate tokenization into the regulated two-tier system via 'unified ledgers' hosting tokenized central bank reserves, commercial bank deposits, and other supervised private monies.
|
BIS Annual Economic Report 2026, Chapter III |
2026 |
Stablecoins and Fragility in Fixed Exchange Rate Regimes
Brandon Joel TanA global-games model of how dollar stablecoins affect parallel FX markets under fixed or managed exchange rates: stablecoins both widen access to foreign currency and create a common public price that can coordinate runs, so their welfare effect is state-dependent — beneficial when misalignment is low, destabilizing when it is high.
Key findings
- Under rationed foreign currency, the true degree of exchange-rate misalignment is unobserved; traditional parallel markets reveal it only imperfectly because information is dispersed across private bilateral trades.
- Stablecoins both widen access to dollar-like claims outside the official allocation system and create a visible, high-frequency common price that aggregates order flow in one venue.
- In the model, stablecoin market depth determines the precision of a common public signal about misalignment — producing a state-dependent welfare effect.
- When misalignment is low, access and allocation gains dominate and stablecoins raise welfare.
- When misalignment is high, a more precise public price compresses belief dispersion and synchronizes exit, so a coordination externality can trigger runs and overturn the access benefit.
- This supports a state-contingent policy: preserve low-cost access in normal states, but use temporary, targeted measures to manage large or run-like flows when misalignment is high.
|
IMF Working Paper WP/26/144, Western Hemisphere Department |
2026 |
High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements
Financial Stability BoardThe FSB's finalized international recommendations for regulating global stablecoin arrangements.
Key findings
- Sets 'same activity, same risk, same regulation' as the guiding principle for stablecoins.
- Requires robust governance, redemption rights, and reserve/stabilization safeguards for GSCs.
|
Financial Stability Board |
2023 |
Regulatory regime for systemic payment systems using stablecoins and related service providers
Bank of EnglandThe Bank of England's proposed regime for stablecoins used at systemic scale in UK payments.
Key findings
- Systemic payment stablecoins should be backed by deposits at the central bank (or equivalent high-quality assets).
- Proposes holding limits during a transition to manage financial-stability risks.
|
Bank of England Discussion Paper |
2023 |
Silicon Valley Bank bankruptcy and Stablecoins stability
Luca Galati, Francesco CapalboThe work examines the contagion effects across major digital assets during the Silicon Valley Bank collapse in early March 2023. It finds evidence of contagion among major stablecoins and Bitcoin, along with significant abnormal movements in stablecoin cumulative returns and volumes.
Key findings
- Evidence of contagion across major stablecoins and Bitcoin was found.
- Substantial abnormal movements in stablecoin cumulative returns and volumes were observed.
- There was a 'flight to safety' from less to more authoritative and trusted stablecoins.
|
International Review of Financial Analysis |
2023 |
Application of the Principles for Financial Market Infrastructures to stablecoin arrangements
CPMI, IOSCOConfirms that systemically important stablecoin arrangements must meet the international standards for payment systems.
Key findings
- Systemic stablecoin arrangements are expected to observe the Principles for Financial Market Infrastructures.
- Emphasises settlement finality, governance and comprehensive risk management.
|
CPMI-IOSCO (BIS) |
2022 |
Stablecoins' role in crypto and beyond: functions, risks and policy
European Central BankECB assessment of stablecoin functions (trading, settlement, DeFi collateral) and their financial-stability risks.
Key findings
- Largest stablecoins are used mainly for crypto trading, settlement and DeFi rather than real-economy payments.
- Reserve opacity and redemption terms are key risks warranting regulation.
|
ECB Macroprudential Bulletin, Issue 18 |
2022 |
Stablecoins: Growth Potential and Impact on Banking
Gordon Y. Liao, John CaramichaelFed staff analysis of how stablecoin growth could affect bank funding and credit, depending on reserve design.
Key findings
- Stablecoins backed by commercial-bank deposits or Treasuries have very different effects on credit intermediation.
- A two-tiered / narrow-bank reserve model can preserve credit while supporting stablecoin growth.
|
Federal Reserve International Finance Discussion Papers No. 1334 |
2022 |
DeFi risks and the decentralisation illusion
Sirio Aramonte, Wenqian Huang, Andreas SchrimpfBIS analysis arguing DeFi retains points of centralisation and carries familiar financial risks.
Key findings
- DeFi exhibits a 'decentralization illusion': governance and infrastructure remain concentrated.
- Stablecoins are a key channel linking DeFi to the traditional financial system.
|
BIS Quarterly Review, December 2021 |
2021 |
Report on Stablecoins
President's Working Group on Financial Markets, FDIC, OCCThe landmark US interagency report recommending that payment-stablecoin issuers be regulated as insured depository institutions.
Key findings
- Recommends Congress require payment-stablecoin issuers to be insured depository institutions.
- Identifies run risk, payment-system risk, and systemic risk / concentration of economic power as the principal concerns.
- Set the template for subsequent US stablecoin legislation.
|
U.S. Department of the Treasury |
2021 |
Taming Wildcat Stablecoins
Gary B. Gorton, Jeffery Y. ZhangArgues stablecoins recreate the instability of the 19th-century 'wildcat' free-banking era and proposes regulating issuers like banks or issuing a CBDC.
Key findings
- Privately produced money that does not trade at par 'no-questions-asked' is inherently run-prone, mirroring pre-1863 wildcat banking.
- Recommends either bringing stablecoin issuers under bank-style regulation and insurance, or introducing a central bank digital currency.
- Frames stablecoins as a monetary-stability question, not merely a consumer-protection one.
|
SSRN Working Paper; later University of Chicago Law Review Top-tier journal |
2021 |
Stablecoins: risks, potential and regulation
Douglas Arner, Raphael Auer, Jon FrostA foundational BIS framework classifying stablecoins by design and reserve model and mapping their risks to regulatory options.
Key findings
- Stablecoins span a spectrum from fully reserved tokenized funds to fractional and algorithmic designs, with materially different risk profiles.
- Regulation should follow a 'same risk, same regulation' principle rather than treating all stablecoins alike.
- Global stablecoins raise cross-border, monetary-sovereignty and financial-stability concerns beyond any single jurisdiction.
|
BIS Working Papers No. 905 |
2020 |
Investigating the impact of global stablecoins
G7 Working Group on StablecoinsThe G7 report that put 'global stablecoins' on the international policy agenda after Libra.
Key findings
- Global stablecoins could pose risks to monetary sovereignty, financial stability and fair competition.
- No global stablecoin should launch until legal, regulatory and oversight challenges are addressed.
|
Committee on Payments and Market Infrastructures (BIS) |
2019 |