Last year, we argued that the BIS stablecoin analysis in its Annual Economic Report 2025, while valuable, underplayed several realities. BIS Paper No. 170 (The impact of stablecoins on the international monetary and financial system) validates parts of that critique, while also calling for nuance.
First, the BIS now gives more weight to the geopolitical dimension.
With around 98% of stablecoin value denominated in US dollars, stablecoins do not challenge the international monetary hierarchy. They reinforce it. USD stablecoins extend access to USD claims beyond traditional banking channels, especially in emerging markets. They may strengthen the dollar’s role just as other blocs explore alternatives. They also create additional demand for US safe assets. Major USD stablecoin issuers hold large T-bill portfolios, so private digital dollars can translate into marginal demand for US sovereign debt.
Second, the paper confirms the “market reality vs institutional inertia” problem. Stablecoins began as crypto trading liquidity. But their growth reflects demand for 24/7, programmable, globally transferable money. BIS now recognises that they can reduce cross-border payment costs, support financial inclusion, and provide a stable store of value in high-inflation countries.
The market is moving now. Official-sector alternatives such as tokenised deposits, remain mostly in pilot or policy-design mode. If credible regulated alternatives do not arrive quickly enough, private stablecoins may become embedded before the official sector is ready.
Our earlier critique should also be nuanced. Stablecoins are not yet mainstream retail payment rails at scale. Much activity remains crypto-native, trading-related, automated, and non-retail. The stronger argument is that stablecoins reveal unmet demand. AML/CFT must be framed carefully. Permissionless blockchains are often more traceable than cash. But traceability is not enforceability. Oversight still depends on regulated issuers, wallet domains, gateways, analytics, and cross-border cooperation. Bank-like regulation adds real value: reserve quality, redemption rights, governance, AML/CFT controls, disclosure, and supervision. But regulation does not eliminate the business case unless the regulated system can match stablecoins’ core features: 24/7 settlement, programmability, composability, cross-border reach, and user accessibility.
The BIS is right that money must preserve singleness, elasticity, and integrity. But the market is also right to demand better infrastructure. The question is whether the official sector can bring those features into the core quickly enough, that is before private digital dollars become the default programmable money layer for large parts of the global economy.
