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The head of the world’s most influential central banking body just told the crypto industry what it probably didn’t want to hear at one of the most closely watched economic gatherings on the planet: stablecoins, as they exist today, aren’t ready for prime time.
Pablo Hernández de Cos, General Manager of the Bank for International Settlements, delivered the critique during the Federal Reserve’s Jackson Hole Economic Policy Symposium on August 28. His recommendation? Tokenized deposits, not stablecoins, should handle the bulk of everyday payments.
The four-part indictment
De Cos didn’t offer a vague wave of skepticism. He laid out specific attributes that stablecoins currently fail to deliver: par redeemability, elasticity, interoperability, and financial integrity. In plainer terms, he’s saying stablecoins can’t guarantee a clean one-to-one exchange back to fiat on demand, they don’t flex well across different blockchain ecosystems, and they fall short on the compliance controls that regulators expect from anything calling itself “money.”
De Cos contrasted stablecoins with tokenized deposits, which are structured as bank liabilities settled in central bank money. The BIS chief argued that tokenized deposits better adhere to the core principles of the monetary system precisely because they don’t try to reinvent it. They digitize what already works rather than replacing it with something untested at scale.
The ‘digital dollarization’ problem
Beyond the technical shortcomings, De Cos flagged a geopolitical concern that rarely gets enough attention in crypto circles: digital dollarization. As US dollar-denominated stablecoins spread globally, they could erode monetary sovereignty in smaller economies. Countries that already struggle to maintain independent monetary policy could find their citizens and businesses defaulting to dollar-pegged stablecoins for daily transactions, effectively outsourcing their monetary system to a private issuer pegged to another nation’s currency.
He also pointed to increased costs for banks as a risk. If deposits migrate from traditional bank accounts into stablecoins, banks lose a cheap source of funding. That, in turn, could tighten credit conditions and raise borrowing costs for everyone.
De Cos referenced Wyoming’s Frontier Stable Token, known as FRNT, as an example of public-sector experimentation with digital assets, emphasizing the need for careful and incremental experimentation rather than full-throttle adoption.
A pattern, not a pivot
For stablecoin issuers, the path De Cos outlined is clear but demanding. He acknowledged that stablecoins could become relevant if they undergo significant changes to enhance redeemability, cross-chain interoperability, and integrity controls.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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