BIS says stablecoins fall short as money, warns of emerging-market risks in annual report

The Bank for International Settlements argued that stablecoins still do not measure up as money in its Annual Economic Report 2026, released Sunday at its yearly general meeting in Basel, Switzerland. 

In a chapter titled "Anchoring trust in money: innovation beyond stablecoins," the report judges today's dollar-pegged tokens against foundational properties the BIS holds that any monetary system must keep, including singleness, elasticity, interoperability, and integrity. Current designs come up short on all of those, the authors argue.

Stablecoin prices deviate from their pegs in secondary markets and their redemptions involve friction, the report said, arguing that the tokens resemble exchange-traded fund shares more than they do a means of payment. That framing resembles comments from BIS General Manager Pablo Hernández de Cos, who in April described stablecoins as functioning more like ETFs than money.

Overall stablecoin supply remains relatively small next to the banking system. The BIS put total market value at roughly $320 billion at the end of May, with more than 99% of fiat-backed supply pegged to the U.S. dollar and most of it split between Tether's USDT and Circle's USDC.

The Block's data reinforce that view, with USDT and USDC dominant over other leading offerings, some of them decentralized or yield-bearing stablecoins.

The report's main new analysis models what widespread adoption would do to the economy, depending on what issuers hold in reserve. In the authors' U.S.-calibrated model, the net effect of stablecoins on output turned slightly negative over the medium term, as higher bank funding costs and weaker lending outweighed the fiscal room created by stablecoin demand for government debt. The drag stayed small even as the authors imagined stablecoins hitting $1 trillion, $2 trillion and $3 trillion in market value.

The BIS said stablecoins account for a significant share of illicit onchain activity because they circulate on permissionless blockchains where pseudonymity and self-custodied wallets weaken know-your-customer and anti-money-laundering checks.

The authors also warned of "stablecoin dollarization," in which households in emerging economies hold dollar-referenced tokens as a store of value, reshaping capital flows and eroding monetary sovereignty.

As in 2025, the BIS report suggested an alternative: address the weaknesses in current stablecoins through internationally consistent rules, and bring tokenization into the two-tier system of central banks and commercial banks.

The centerpiece of the idea would be a "unified ledger" holding tokenized central bank reserves, tokenized commercial bank money and other regulated private money in one venue, with central bank money as the anchor. The bank pointed to Project Agora, a cross-border payments prototype involving eight central banks, the BIS and more than 40 private institutions, as evidence the model can work.