Banks and industry associations have argued that paying interest on stablecoins makes them bank-like, so they should be regulated accordingly. A BIS paper suggests the comparison is more apt than they realize, but not for the reasons they think.
The research published last week explored stablecoin issuers from the perspective of managing stablecoin risks through liquidity and capital requirements. While brief on this point, it compared banks to stablecoin issuers, concluding they are quite different from a balance sheet perspective, especially in terms of flexibility and where the risks lie.
It notes that the main banking risks are on the asset side of a bank’s balance sheet, where loans could be illiquid and non performing. But the liability side, such as customer deposits, is stable most of the time, unless customers start worrying about the bank’s assets. Contrast that with stablecoins, where the asset side of the balance sheet should be higher quality than a bank, but the stablecoin balance is relatively flighty.
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