A new report from the Bank for International Settlements (BIS) challenges the notion that stablecoins can serve as real money in a modern financial system.
According to the BIS Annual Economic Report 2025, stablecoins fail the fundamental tests of “singleness,” “elasticity” and “integrity”— three critical criteria that define effective monetary instruments.
The BIS describes stablecoins as “digital bearer instruments” that resemble financial assets more than true money. “Stablecoins perform poorly when assessed against the three tests for serving as the mainstay of the monetary system,” the report claims.
Unlike central bank-backed money, which is accepted “at par” and requires no background checks, private entities issue stablecoins and often trade at fluctuating rates. This undermines the core principle of monetary singleness, it claims.
Stablecoins fail elasticity and integrity tests
Elasticity, the second test, is crucial for absorbing shocks and meeting large-value payment demands, BIS said in its report.
It pointed out that “any additional supply of stablecoins thus requires full upfront payment by its holders,” likening it to a “strict cash-in-advance setup” that contrasts with the flexibility of modern banking systems, where central banks provide liquidity as needed.
The third and perhaps most damning failure lies in the area of integrity. The report claims stablecoins’ design, especially those transacted via unhosted wallets on public blockchains, makes them prone to financial crime.
“Stablecoins have significant shortcomings when it comes to promoting the integrity of the monetary system,” the BIS notes, emphasizing their vulnerability to money laundering, sanctions evasion and terrorist financing.
Stablecoins should have a limited role
While acknowledging the continued demand for stablecoins due to features like cross-border accessibility and lower transaction costs, the BIS argues that these instruments should only play a limited, well-regulated role.
“Society can re-learn the historical lessons about the limitations of unsound money,” the report cautions. “Bold action by central banks and other public authorities can push the financial system along the right path, in partnership with the financial sector.”
Circle, the company behind USDC (USDC), saw its stock drop more than 15% on Tuesday after the BIS report, hitting $222. CRCL shares reached an all-time high of $299 on Monday.
Despite its hard take on stablecoins, the BIS report praised tokenization as a “transformative innovation” for the next-generation monetary and financial system. It said tokenization builds on the current financial system rather than replacing it.
Meanwhile, some in the crypto community said it is “no surprise” that the BIS paper is generally negative on stablecoins, given that it is a “regulatory body owned by global central banks.”
“The BIS is hysterical in its opposition to crypto,” Jim Walker, chief economist at Aletheia Capital Limited, wrote. “The first criterion, backed by a central bank, should make it a laughing stock given the historical failures of those institutions around the world.”
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