The Bank for International Settlements published its Annual Economic Report on June 23, with a dedicated chapter arguing that stablecoins lack the fundamental monetary properties required to function as reliable payment instruments. The core problem, according to the BIS, is something called “singleness,” which is the ability to be redeemed at par with central bank money.
Chapter III of the report, co-authored by Frank Smets and Gaston Gelos, lays out a methodical case against the current architecture of stablecoins. Gelos, who serves as the BIS Deputy Head of the Monetary and Economic Department, put it bluntly in a Reuters podcast: stablecoins and other tokens depend on the stability that central banks provide in order to function smoothly.
The report identifies four structural deficiencies in stablecoins operating on public, permissionless blockchains. First, redeemability: the ability to actually cash out at face value isn’t always guaranteed. Second, liquidity elasticity, meaning stablecoins can’t expand or contract their supply in response to market stress the way central bank money can. Third, interoperability between different stablecoin ecosystems remains fragmented. And fourth, resilience against financial crime on open blockchains remains a persistent vulnerability.
