According to representatives of the organization, current stablecoins do not settle transactions either directly or indirectly on central bank balance sheets. As a result, they do not guarantee redemption at face value between issuers and blockchains under any circumstances. Redemptions make such instruments more similar to ETFs than to a full-fledged means of payment, writes forklog.com.
The report also specifically noted the public blockchains on which stablecoins operate. The BIS pointed out fragmentation between L1 and L2 networks and deteriorating interoperability—the same stablecoin is not natively interchangeable across different protocols.
The document also lists KYC and AML/CFT risks due to pseudonymity and non-custodial wallets, as well as unclear accountability, weak transparency, and governance issues.
According to the BIS, the stablecoin market capitalization stood at approximately $320 billion as of the end of May. The bank warned that the wider adoption of such assets could increase the cost of funding for banks and restrict lending to the real economy.
The BIS identified “stablecoin dollarization” as a separate risk. Rising demand for dollar-pegged stablecoins in countries with weaker currencies could increase the volatility of cross-border capital flows and erode monetary sovereignty.
As an alternative, the Bank proposed developing a legal infrastructure for tokenization.
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