Major Central Banks, including the Bank for International Settlements (BIS), warned that stablecoins struggle to fulfill their role as a currency. The BIS stated in its annual economic report published on the 24th (local time) that stablecoins do not meet the basic requirements of uniqueness, resilience, and integrity necessary for a currency.
The report pointed out that "stablecoins lack support from a Central Bank and do not have traditional financial controls such as customer verification (KYC)," and that "the provision of liquidity through lending is also difficult, so their function as currency is limited."
The scale of stablecoins currently in circulation is about $250 billion, most of which consists of types that track the value of the U.S. dollar, such as Tether and Circle's USDC. While developers tout the ability to simplify international remittances as an advantage, the BIS believes these can also be misused as tools for money laundering and drug trafficking.
Shin Hyun-song, head of the BIS Monetary and Economic Department, noted that "stablecoins can cause market disruption during large-scale redemptions by investors," and that "due to high exchange rate volatility and the necessity to always maintain collateral assets at a 1:1 ratio, the resilience of the financial system is also diminished."
The report evaluated that "stablecoins do not function like a single currency and fail to meet the core property of legal tender known as 'unconditional acceptance.'" It also added that "they could introduce new risks according to legal and governance systems, and there is a high possibility of currency sovereignty weakening and capital outflows in emerging or developing countries."
These warnings are at odds with the Trump administration's policy direction to integrate stablecoins into the formal financial system. President Trump has declared intentions to "make the U.S. the world capital of cryptocurrency" and is supporting the cryptocurrency group 'World Liberty Financial' that holds stablecoin USD1. The Trump administration also significantly eased cryptocurrency regulations that were in place during the Biden administration.
The BIS emphasized that a tokenized deposit system involving Central Banks and commercial banks could serve as a better alternative to stablecoins. The BIS is currently conducting an experiment in partnership with the central banks of the G7 and 43 commercial banks to enhance the speed and efficiency of cross-border payments through 'Project Agora.'
The report warned that "society may choose a next-generation currency system based on verified trust and technical infrastructure, or it may repeat past mistakes due to digital currencies that do not meet performance standards."