At Jackson Hole, the BIS Head Said Stablecoins Fail Every Test of Money. Banks Are Building Them Anyway.

At the Jackson Hole Economic Policy Symposium on August 28, Bank for International Settlements General Manager Agustín Carstens delivered a keynote that amounted to a formal rejection of stablecoins as a viable payments instrument. Speaking just hours after Federal Reserve Chair Kevin Warsh conspicuously avoided mentioning digital assets entirely, Carstens used a three-test framework — singleness, interoperability, and integrity — to argue that stablecoins fail every criterion that defines sound money.

The singleness test is the most intuitive. In a functioning monetary system, one dollar is worth one dollar regardless of the institution holding it. Carstens illustrated the problem with a scenario: if Ben holds USDT and Marie holds USDC, and a merchant accepts only one, the system fractures into parallel currencies with different acceptance and risk profiles. “A stablecoin issued by a private entity is not the same as money issued by a central bank,” Carstens said. “It does not pass the test of singleness.”

The interoperability test follows naturally. Central bank money settles across all participants in the system without friction. Stablecoins, by contrast, operate on fragmented rails with no universal settlement layer. A USDT transaction on Tron and a USDC transaction on Ethereum are not interchangeable without conversion — a friction that tokenized deposits, built on shared institutional infrastructure, are designed to eliminate.

The integrity test is where Carstens drew the sharpest line. Central bank money carries an implicit guarantee of finality backed by sovereign authority. Stablecoins carry the counterparty risk of their issuer, the reserve composition risk of their backing, and the regulatory risk of an evolving framework. The GENIUS Act, enacted on July 18, 2025, will begin enforcement on January 18, 2027 — but seven agencies have already missed the one-year rulemaking deadline, leaving the current landscape fragmented and provisional.

Carstens recommended tokenized deposits as the institutional alternative — claims on commercial banks represented on programmable rails, preserving the two-tier monetary structure while adding settlement speed and composability. The BIS has been advancing this position through its Innovation Hub’s Project Agorá, which brings together seven central banks and major commercial banks to prototype cross-border tokenized deposit settlement.

The structural tension with the private sector is now explicit. A consortium of twelve global heavyweights — including Bank of America, Wells Fargo, and Santander — is actively building a stablecoin venture on public chains, directly competing with the BIS-endorsed tokenized deposit model. JPMorgan is separately evaluating its own stablecoin. Fireblocks reports over $100 billion in monthly stablecoin volume, growing 300% year-over-year. The industry is not waiting for the BIS to approve its architecture.

Carstens acknowledged that stablecoins and tokenized deposits will likely coexist in the near term, but framed the distinction as fundamental: one is a private instrument that replicates some functions of money; the other is an extension of the existing monetary system with institutional guarantees intact. “The question is not whether new forms of digital money will emerge,” he said. “The question is whether they will preserve the properties that make money trustworthy.”

For institutional professionals, the BIS framework adds a new analytical layer to the stablecoin debate. The twelve-bank consortium and the GENIUS Act regulatory scaffolding represent a bet that stablecoins on public chains can meet institutional standards. Carstens is betting they cannot — and that the market will eventually converge on tokenized deposits as the programmable money layer. The Jackson Hole symposium, themed “Financial Innovation: Implications for Payments and Policy,” produced two distinct signals from the world’s monetary authorities: Warsh’s silence and Carstens’ explicit rejection. Neither offered comfort to those building on the stablecoin assumption.