BIS Warns Dollar Stablecoins Could Disrupt Financial Stability and Trigger Market Risks

Highlights:

• BIS warns dollar stablecoins could create risks for financial stability as their use in payments keeps growing.
• Sudden withdrawals of stablecoins from financial systems can put pressure on markets and banks.
• Regulators are moving faster to control stablecoins and reduce financial risks.

Bank for International Settlements General Manager Pablo Hernández de Cos warned on Monday that large stablecoins could affect financial stability and monetary policy. Pablo delivered the remarks in Tokyo during a seminar hosted by the Bank of Japan. He said dollar-backed tokens could create material consequences if they grow large enough to compete with traditional money.

BIS general manager Pablo Hernández de Cos warns that US dollar stablecoins could strain banks and financial policy, calling for stronger global regulatory coordination. pic.twitter.com/59N2B0zadl

— Stablecoin Beat (@Stablecoin_beat) April 20, 2026

He said stablecoins support payments, trading, and cross-border transfers across global markets. However, he said these tokens still fall short as a widely trusted form of money because they lack stability guarantees. He explained that stablecoins do not offer the same assurances as central bank-issued currency because issuers control reserves and redemption terms.

He compared major stablecoins like USDT and USDC to investment products because they include fees and redemption conditions. Pablo pointed to limits on primary market redemptions that affect how users access reserves during withdrawals. He added that stablecoin prices can move away from one dollar during market stress in secondary markets, which creates risk for users.

He said these features make stablecoins behave more like exchange-traded funds than cash-like money. Therefore, he said that the current structures limit their use as reliable payment instruments in everyday transactions.

BIS Warns Dollar Stablecoins Pose Risks to Markets and Financial Systems

Pablo warned that stablecoin structures could expose financial markets to stress during large withdrawal events. He said issuers hold reserves in short-term government bonds and bank deposits to support their tokens. The bank official said this structure creates risk during heavy withdrawals because issuers must liquidate reserves quickly.

He said rapid redemptions could force issuers to sell government bonds into already strained markets. Consequently, such sales could add pressure to funding conditions and increase volatility in bond markets. He also warned that this stress could spread into the banking system when deposit outflows reduce liquidity in banks.

According to him, this process resembled a run scenario observed in money market funds in previous crises. He added that stablecoins carry contagion risk because their reserves link directly to traditional financial assets. Therefore, he urged regulators to address these vulnerabilities before adoption expands further.

He also expressed concerns about compliance lapses in stablecoin activity because of inadequate monitoring of blockchain transactions. Pablo indicated that many users use public blockchains and unhosted wallets without full surveillance. As a result, a large share of stablecoin activity sits outside traditional monitoring systems used by financial authorities.

Global Authorities Move to Tighten Stablecoin Rules as Risks Grow

Authorities across Europe, the United Kingdom, and Switzerland have started to respond to risks flagged by the Bank for International Settlements. Denis Beau urged the European Union to tighten rules on non-euro stablecoins used in payments. He said limits on their use could reduce systemic exposure during periods of financial stress. He also warned that differences in regulation could create arbitrage risks across jurisdictions.

France’s central bank is pushing for a tougher rewrite of MiCA, warning that stablecoins used for payments could become a major systemic risk if left unchecked 🚨
Deputy Governor Denis Beau argues the EU should restrict stablecoin payments, especially those pegged to non-euro…

— Solix Trading (@Solix_Trade) April 10, 2026

Meanwhile, the European Central Bank said stablecoins share features with tokenized money market funds. It noted that both structures involve liquidity transformation and carry run risk during stress periods. However, it said they operate under different transparency and liquidity rules, which can shape market outcomes.

In the United Kingdom, the House of Lords questioned crypto firms in March about the risks of stablecoins to financial stability. Lawmakers asked whether these tokens could drain bank deposits or trigger bank-like runs during market stress. They also raised concerns about potential links to financial crime due to gaps in transaction monitoring systems.

At the same time, UBS and other firms launched a franc-based stablecoin pilot on April 8 in a regulatory sandbox. They aim to test blockchain-based payments while keeping the system under supervision.