The Bank for International Settlements (BIS) has issued a stark warning against the growing reliance on stablecoins, arguing that they fall short of functioning as legitimate money within a modern financial system.
In its 2025 Annual Economic Report released June 24, the BIS criticized stablecoins for failing to meet three essential criteria of effective money: singleness, elasticity, and integrity. The institution described these digital assets as “digital bearer instruments” that behave more like tradable financial assets than stable, widely accepted currencies.
The BIS outlined that unlike central bank-issued money—which is universally accepted at face value and doesn’t require identity checks—stablecoins are privately issued and often fluctuate in value. This undermines the principle of “singleness,” which demands that money maintains the same value across all uses and transactions.
Elasticity, the second benchmark, also emerged as a major weakness. The report criticized the rigid supply mechanics of stablecoins, noting that any increase in their circulation depends entirely on users providing full payment upfront. This “cash-in-advance” requirement, the BIS argued, restricts the kind of responsive liquidity that central banks provide during financial shocks or large-value transactions.
But perhaps the most concerning issue, according to the BIS, is integrity. The report cited serious risks associated with stablecoins—especially those traded via unhosted wallets on public blockchains—claiming they are vulnerable to abuse for illicit purposes like money laundering, terrorist financing, and sanctions evasion.
Despite these criticisms, the BIS acknowledged that demand for stablecoins persists, mainly because of their utility in cross-border transactions and lower fees. Still, the report recommended that their use be strictly limited and subject to robust regulatory oversight.
While stablecoins took a beating in the report, the BIS expressed optimism about another blockchain-based development: tokenization. The institution praised tokenized finance as a “transformative innovation” that enhances, rather than disrupts, the existing financial system.
Meanwhile, according to a June 2024 report by the BIS, the likelihood of central banks issuing a wholesale CBDC now surpasses the chances of them releasing a retail one.
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