Stablecoins not a credible means of payment at scale, BIS chief says

In Jackson Hole, Wyoming, on August 28, the chief of the Bank for International Settlements, Pablo Hernandez de Cos, stated that stablecoins are not reliable means of payment when scaled up. Tokenized deposits, on the other hand, present a more promising case to leverage the advantages of this emerging technology. De Cos pointed out several concerns surrounding stablecoins, such as their potential to lower sovereign borrowing costs, but at the same time, bank funding costs could rise.

Ordinary borrowers may end up paying higher rates, and the lack of interoperability among stablecoin platforms raises money-laundering concerns. Additionally, the growing adoption of dollar-pegged stablecoins could lead to concerns about monetary sovereignty and the potential for digital dollarization. While tokenized deposits can offer a more direct path to harness tokenization, they also need to address interoperability, governance, and legal hurdles, including settlement.