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The Bank for International Settlements (BIS) argued in its 2026 Annual Economic Report, published Sunday in Basel, that stablecoins fall short of the key monetary properties that make money trustworthy and function more like exchange-traded fund shares than a means of payment.
The report also warned that widespread dollar-pegged stablecoin adoption is accelerating dollarization in emerging markets and could undermine local monetary sovereignty.
BIS Says Stablecoins Fall Short on Core Monetary Functions
The report judges stablecoins against four properties the BIS considers foundational to any monetary system: singleness, elasticity, interoperability, and integrity. Current designs fall short on all four, the authors argue.
Secondary-market prices deviate from their $1 peg, even if only modestly in normal conditions. Redemptions carry friction, meaning conversion back to cash is not always instant or guaranteed at par.
Transfers do not settle on central bank balance sheets, and stablecoins cannot guarantee par exchange across issuers and blockchains under all conditions.
“Redemption frictions are common, indicating that current stablecoin designs resemble exchange-traded fund shares rather than means of payment,” the report said.
The stablecoin market stood at roughly $320 billion as of the end of May 2026, with 99.4% of fiat-backed supply pegged to the U.S. dollar and most of it split between Tether’s USDT and Circle’s USDC.
BIS Warns Dollar Stablecoins Could Accelerate Emerging-Market Dollarization
The sharpest warning in the report concerns emerging markets. The BIS said rising flows of non-dollar currencies into dollar-pegged stablecoins are weakening domestic currencies in spot markets. This situation exposes friction between crypto and traditional foreign exchange markets and raises the cost of dollar access through FX swap markets.
Capital controls designed to manage these flows, the report noted, are “likely to be imperfect given the digital bearer-like nature of tokens and the availability of unhosted wallets.” Once dollar-based stablecoin adoption takes hold in an economy, the BIS says, it tends to persist for years.
As an alternative, the BIS proposes a unified ledger combining tokenized central bank reserves and commercial bank deposits on a single regulated platform, with central bank money as the anchor.
