Stablecoins Fail BIS “Three Key Tests” as New Report Warns of Financial Risks
A new report from the Bank for International Settlements (BIS) has cast doubt on the long-term role of stablecoins in the global financial system, arguing that they fall short of three essential criteria for functioning as true money.
The BIS, which serves as a coordinating body for central banks worldwide, released its 2025 Annual Economic Report on Tuesday, highlighting concerns around stablecoins’ structure, stability, and integrity.
BIS Warns Stablecoins Lack Singleness, Elasticity, and Integrity
According to the report, stablecoins do not meet the standards of singleness, elasticity, and integrity. These are the core traits the BIS says are necessary for any instrument that hopes to support a modern monetary system.
“Stablecoins do not stack up well against the three desirable characteristics of sound monetary arrangements and thus cannot be the mainstay of the future monetary system,” the report stated.
The authors acknowledged that stablecoins have some benefits. These include programmability, pseudonymity, and ease of use. Their structure also offers faster and cheaper transactions, particularly for cross-border payments.
But the BIS concluded that these advantages are outweighed by risks, especially when compared to money issued by central banks and regulated financial institutions.
“Unlike central bank-backed money, which is accepted at par and doesn’t require background checks, stablecoins are issued by private entities and can trade at fluctuating values,” the report said.
This undermines the idea of singleness, the notion that money should have uniform value across the system.
On the issue of elasticity, the BIS argued that stablecoins cannot respond to shocks or demand surges in the same way as central bank money.
“Any additional supply of stablecoins requires full upfront payment by holders,” the report noted, calling it a “strict cash-in-advance setup.”
By contrast, traditional banking systems rely on central banks to inject liquidity during times of stress.
The third test, integrity, raised the strongest concerns. The report cited the potential for stablecoins, especially those held in unhosted wallets, to be used for illicit activities.
“Stablecoins have significant shortcomings when it comes to promoting the integrity of the monetary system,” the BIS wrote, referencing their susceptibility to money laundering, terrorist financing, and sanctions evasion.
Despite this, the BIS acknowledged that demand for stablecoins persists, especially in countries with high inflation or limited access to U.S. dollars. But it insisted their role should be strictly limited and heavily regulated.
“Society can re-learn the historical lessons about the limitations of unsound money,” the authors warned. “Bold action by central banks and other public authorities can push the financial system along the right path.”
The report caused market ripples. Shares of Circle, the issuer of USDC, dropped over 15% on Tuesday following the BIS release. Circle’s stock had reached an all-time high of $299 on Monday but fell to $222 after the publication.
While the BIS was critical of stablecoins, it took a more optimistic view of tokenization. The report described it as a “transformative innovation” that could strengthen financial infrastructure by building on existing systems.
Reaction to the report was mixed. Some in the crypto community dismissed the findings as predictable. “The BIS is hysterical in its opposition to crypto,” said Jim Walker, chief economist at Aletheia Capital.
He argued that calling central bank backing a key requirement for money was “laughable” given past monetary failures.
The BIS report adds to growing regulatory scrutiny of stablecoins globally.
Though their use continues to grow, especially in emerging markets, the BIS message is clear: stablecoins are not ready to replace traditional money, and may never be.
Despite BIS Criticism, Stablecoin Momentum Grows
While the Bank for International Settlements (BIS) continues to warn against the integration of stablecoins into traditional finance, the global appetite for these digital dollars tells a different story.
— Cryptonews.com (@cryptonews) June 13, 2025
Stablecoin market cap has surged to $228B in 2025, with USDT and USDC driving $33B growth.#Stablecoins #DeFi https://t.co/y68WXWUZM6
The stablecoin supply now exceeds $150 billion, with growing institutional and retail use. In 2024, stablecoins even briefly outpaced Visa in transaction volume, a milestone that signaled just how seriously payment giants are taking the shift.
Major corporations like Amazon and Walmart have reportedly explored stablecoin-based systems, adding pressure on legacy providers like Visa and Mastercard.
Meanwhile, Ripple is preparing to enter the space with its own U.S. dollar-backed stablecoin, intensifying competition.
— Cryptonews.com (@cryptonews) June 19, 2025
The GENIUS Act has been passed — but experts say stablecoins have the potential to damage the global economy #Crypto #Tether #Circle #USDT #USDChttps://t.co/NWGB63iV2M
The U.S. Senate recently passed the GENIUS Act, a bill aimed at establishing a regulatory framework for stablecoins. If passed by the House, it could turn the U.S. into a global hub for dollar-backed digital assets.
Even President Donald Trump has shown support for the legislation.
As stablecoins make inroads, platforms like Coinbase and JPMorgan are building infrastructure for crypto-native payments, and nearly 90% of financial institutions are now using or exploring stablecoin integration.
Despite the BIS’s skepticism, the momentum behind stablecoins continues to build, with regulation, innovation, and adoption driving the next phase.
The post Stablecoins Fail BIS “Three Key Tests” as New Report Warns of Financial Risks appeared first on Cryptonews.
Read More
Republic to Tokenize SpaceX Shares, Opening Access to Retail Investors
Fintech Firm Fiserv Taps PayPal and Circle to Power Its Stablecoin Initiative
Stablecoins Fail BIS “Three Key Tests” as New Report Warns of Financial Risks
A new report from the Bank for International Settlements (BIS) has cast doubt on the long-term role of stablecoins in the global financial system, arguing that they fall short of three essential criteria for functioning as true money.
The BIS, which serves as a coordinating body for central banks worldwide, released its 2025 Annual Economic Report on Tuesday, highlighting concerns around stablecoins’ structure, stability, and integrity.
BIS Warns Stablecoins Lack Singleness, Elasticity, and Integrity
According to the report, stablecoins do not meet the standards of singleness, elasticity, and integrity. These are the core traits the BIS says are necessary for any instrument that hopes to support a modern monetary system.
“Stablecoins do not stack up well against the three desirable characteristics of sound monetary arrangements and thus cannot be the mainstay of the future monetary system,” the report stated.
The authors acknowledged that stablecoins have some benefits. These include programmability, pseudonymity, and ease of use. Their structure also offers faster and cheaper transactions, particularly for cross-border payments.
But the BIS concluded that these advantages are outweighed by risks, especially when compared to money issued by central banks and regulated financial institutions.
“Unlike central bank-backed money, which is accepted at par and doesn’t require background checks, stablecoins are issued by private entities and can trade at fluctuating values,” the report said.
This undermines the idea of singleness, the notion that money should have uniform value across the system.
On the issue of elasticity, the BIS argued that stablecoins cannot respond to shocks or demand surges in the same way as central bank money.
“Any additional supply of stablecoins requires full upfront payment by holders,” the report noted, calling it a “strict cash-in-advance setup.”
By contrast, traditional banking systems rely on central banks to inject liquidity during times of stress.
The third test, integrity, raised the strongest concerns. The report cited the potential for stablecoins, especially those held in unhosted wallets, to be used for illicit activities.
“Stablecoins have significant shortcomings when it comes to promoting the integrity of the monetary system,” the BIS wrote, referencing their susceptibility to money laundering, terrorist financing, and sanctions evasion.
Despite this, the BIS acknowledged that demand for stablecoins persists, especially in countries with high inflation or limited access to U.S. dollars. But it insisted their role should be strictly limited and heavily regulated.
“Society can re-learn the historical lessons about the limitations of unsound money,” the authors warned. “Bold action by central banks and other public authorities can push the financial system along the right path.”
The report caused market ripples. Shares of Circle, the issuer of USDC, dropped over 15% on Tuesday following the BIS release. Circle’s stock had reached an all-time high of $299 on Monday but fell to $222 after the publication.
While the BIS was critical of stablecoins, it took a more optimistic view of tokenization. The report described it as a “transformative innovation” that could strengthen financial infrastructure by building on existing systems.
Reaction to the report was mixed. Some in the crypto community dismissed the findings as predictable. “The BIS is hysterical in its opposition to crypto,” said Jim Walker, chief economist at Aletheia Capital.
He argued that calling central bank backing a key requirement for money was “laughable” given past monetary failures.
The BIS report adds to growing regulatory scrutiny of stablecoins globally.
Though their use continues to grow, especially in emerging markets, the BIS message is clear: stablecoins are not ready to replace traditional money, and may never be.
Despite BIS Criticism, Stablecoin Momentum Grows
While the Bank for International Settlements (BIS) continues to warn against the integration of stablecoins into traditional finance, the global appetite for these digital dollars tells a different story.
— Cryptonews.com (@cryptonews) June 13, 2025
The stablecoin supply now exceeds $150 billion, with growing institutional and retail use. In 2024, stablecoins even briefly outpaced Visa in transaction volume, a milestone that signaled just how seriously payment giants are taking the shift.
Major corporations like Amazon and Walmart have reportedly explored stablecoin-based systems, adding pressure on legacy providers like Visa and Mastercard.
Meanwhile, Ripple is preparing to enter the space with its own U.S. dollar-backed stablecoin, intensifying competition.
— Cryptonews.com (@cryptonews) June 19, 2025
The U.S. Senate recently passed the GENIUS Act, a bill aimed at establishing a regulatory framework for stablecoins. If passed by the House, it could turn the U.S. into a global hub for dollar-backed digital assets.
Even President Donald Trump has shown support for the legislation.
As stablecoins make inroads, platforms like Coinbase and JPMorgan are building infrastructure for crypto-native payments, and nearly 90% of financial institutions are now using or exploring stablecoin integration.
Despite the BIS’s skepticism, the momentum behind stablecoins continues to build, with regulation, innovation, and adoption driving the next phase.
The post Stablecoins Fail BIS “Three Key Tests” as New Report Warns of Financial Risks appeared first on Cryptonews.
Read More
Republic to Tokenize SpaceX Shares, Opening Access to Retail Investors