BIS General Manager Pablo Hernández de Cos used a seminar at the Bank of Japan today to deliver a broad assessment of stablecoins, covering their potential utility, structural weaknesses and macro-financial risks. The bulk of the speech focused on the challenges that widespread adoption would pose, from credit contraction and financial stability to dollarization and financial integrity. In that respect, it was consistent with the BIS’s recent output, including a highly critical paper last year that framed stablecoins as “unsound money“.
Where the speech differed slightly was in acknowledging that some of these risks could be mitigated. Mr Hernández pointed to ensuring redemption at par through regulation, deposit insurance type arrangements and central bank liquidity backstops as possibilities. The earlier papers identified problems without exploring solutions. This speech at least engaged with the question, even if it did so briefly.
The central bank liquidity point is worth noting. The Bank of England has gone further than any other central bank in this area, proposing to act as banker and lender of last resort to systemic stablecoin issuers. Mr Hernández stopped short of endorsing that approach but raised it as a possibility, which is a departure from the BIS’s prior posture of pure critique.
He also highlighted the BIS’s preferred direction for the broader financial system, pointing to the “unified ledger” concept under which central banks would provide tokenized money for settlement on private, permissioned platforms. Project Agorá, a collaboration between central banks including the Bank of Japan, was cited as a concrete example. While these wholesale solutions could insulate institutional players from some stablecoin risks, they do not address retail demand.
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