Top central bankers have delivered a blistering critique of stablecoins, declaring them unfit to function as mainstream money and warning of major risks if they are elevated to a central role in global finance. In a chapter from its latest annual report, the Bank for International Settlements (BIS)—the global forum for central banks—argues that stablecoins “perform badly” on the three fundamental tests of money: singleness, elasticity, and integrity. The statement directly challenges U.S. President Donald Trump’s push to position stablecoins at the heart of America’s financial future.
As reported by the Financial Times, the BIS’s findings are a rebuke to Trump’s crypto-friendly agenda, which has included rolling back Biden-era regulations and openly backing World Liberty Financial, a cryptocurrency company that issues its own stablecoin, USD1. Trump, who returned to office on a promise to make the U.S. “the crypto capital of the world,” has made no secret of his ambitions to integrate digital assets into the broader economy. But central bankers warn that such a pivot could come at a serious cost.
Hyun Song Shin, head of the BIS monetary and economic department, expressed deep concern about the stability of stablecoins in times of stress. “It’s really asking, if there are such redemptions in the stablecoin space, what would be the consequences?” he told reporters. The BIS is especially wary of a situation where investor withdrawals from stablecoins trigger systemic financial instability—a scenario it sees as plausible due to the lack of a lender of last resort in the crypto space.
Stablecoins are marketed as a bridge between the volatile world of cryptocurrencies like Bitcoin and the traditional financial system. They maintain their value by being pegged one-to-one to fiat currencies, usually backed by assets like U.S. Treasury bonds or money market funds. Their proponents claim they offer faster and more efficient cross-border payments, particularly when compared to international bank transfers.
But the BIS report dismantles these claims, arguing that stablecoins fail precisely because they are not backed by central banks. “Stablecoins often trade at varying exchange rates, undermining singleness,” the report states. This inconsistency erodes the trust and uniformity that users expect from real money. The BIS also criticizes stablecoins for their inability to fulfil the “no questions asked” principle of bank-issued currency—that is, the idea that money should be universally accepted at face value without scrutiny.
Moreover, the report contends that stablecoins lack “elasticity”—the financial system’s ability to expand or contract the money supply as needed, usually through bank lending. “Any additional issuance requires full upfront payment by holders, which undermines elasticity by imposing a ‘cash-in-advance’ constraint,” the BIS said. This structural flaw means stablecoins cannot play the same role in supporting economic activity as traditional bank money.
One of the most damning findings in the report is that stablecoins are frequently used as tools for illicit finance. The BIS notes that they are often held anonymously and lack the “know-your-customer” (KYC) protections that are standard in traditional banking. “Stablecoins have been the go-to choice for illicit use to bypass integrity safeguards,” the report warns, citing links to drug trafficking, money laundering, and other criminal activity.
Currently, there are about $250 billion worth of stablecoins in circulation, with the vast majority tied to the U.S. dollar. Tether and Circle’s USDC dominate the market, and both have seen explosive growth in recent years. At the same time, both the U.S. and UK governments have begun developing regulatory frameworks to govern stablecoin usage in an effort to keep pace with their rapid adoption.
Yet for the BIS, stronger oversight alone is not enough. The institution advocates for an entirely different approach: creating a centralized infrastructure of tokenized deposits operated by central and commercial banks. This system, dubbed Project Agorá, is being tested with seven major central banks and 43 commercial financial institutions. It aims to deliver the efficiency and speed promised by crypto—but within a framework of legal clarity, systemic backing, and institutional trust.
“Society has a choice,” the BIS declares in its report. “The monetary system can transform into a next-generation system built on tried and tested foundations of trust and technologically superior, programmable infrastructures. Or society can relearn the historical lessons about the limitations of unsound money, with real societal costs, by taking a detour involving private digital currencies that fail the triple test of singleness, elasticity and integrity.”
The BIS’s warning has major implications, not only for financial stability but also for the political direction of economic policy in an increasingly digitized world. Trump’s embrace of crypto and stablecoins—once a fringe innovation—has propelled them into the center of political and financial discourse. His support for private digital money stands in stark contrast to the traditional monetary consensus held by central bankers worldwide.
The central bankers’ assessment also signals a clear rift between the institutions tasked with maintaining monetary stability and the political leadership in Washington. While Trump’s administration views digital currencies as a tool for financial innovation and deregulation, the BIS sees them as a threat to monetary sovereignty, especially for emerging markets that could face capital flight if stablecoins become widespread.
This is not the first time the BIS has expressed caution over cryptocurrencies, but its latest report is one of its most direct and uncompromising statements to date. The findings serve as a clear warning to governments, regulators, and the public: moving toward a stablecoin-dominated financial system could undermine the very foundations of monetary trust, introduce new forms of risk, and sideline the institutions that have historically safeguarded the global economy.
As debates over the future of money intensify, and as Trump continues to champion digital assets from the Oval Office, the BIS’s message is unequivocal: stablecoins may be growing in popularity, but they remain fundamentally flawed. In a time of rising financial experimentation, central bankers are calling for caution — and for a recommitment to the principles that have long underpinned sound money.
