Bank for International Settlements warns: Stablecoins resemble securities, redemption flaws may trigger a financial run

The global stablecoin market size surpasses $310 billion, with the Bank for International Settlements (BIS) warning of regulatory fragmentation risks. Since issuers’ reserve assets are mostly U.S. Treasuries and deposits, mechanism flaws could trigger financial runs.

Market size exceeds $320 billion, BIS warns of potential stablecoin fragmentation risks

As the digital asset market rapidly expands, stablecoins are playing an increasingly important role in the financial system. According to the latest data from CoinGecko, the total global circulating stablecoins amount to approximately $315.9 billion, with the vast majority pegged to the US dollar.

Pablo Hernández de Cos, General Manager of the Bank for International Settlements (BIS), spoke at a seminar held by the Bank of Japan on Monday, expressing serious concern about current stablecoin development trends. If stablecoin size continues to grow to rival traditional currencies but lacks effective international regulatory frameworks, it could have significant consequences for financial stability and economic policy.

The current market structure is highly concentrated, with only Tether ($USDT) and Circle ($USDC) accounting for about 85% of global circulation. According to statistics, $USDT has a market cap of about $186 billion, while $USDC is approximately $78.8 billion.

Pablo Hernández de Cos believes that this market concentration reflects systemic importance and highlights the deficiencies in existing stablecoin arrangements as a means of payment.

Although stablecoins offer advantages such as rapid cross-border transfers and integration with smart contracts, their operational mechanisms still differ significantly from true currencies. Global legislative bodies must strengthen cooperation to prevent fragmented regulations across countries, or risk causing severe market fragmentation and creating opportunities for regulatory arbitrage by enterprises.

Stablecoin properties increasingly resemble securities; redemption flaws could trigger financial runs

Regarding the nature of stablecoins, Pablo Hernández de Cos offers a perspective: Current stablecoin operation models are more akin to investment products or index ETFs, leaning more toward securities than traditional currencies.

Issuers often impose fees or specific restrictions during primary market redemptions, and secondary market prices frequently deviate from the peg of 1. These “redemption frictions” prevent stablecoins from maintaining stability under pressure, unlike traditional fiat currencies. Since stablecoin issuers typically hold short-term government bonds and bank deposits as reserves, this structure harbors significant contagion risks.

If a large-scale withdrawal occurs, issuers may be forced to sell reserves in already stressed markets to meet redemption demands, transmitting liquidity pressures to the banking system. This chain reaction resembles the Silicon Valley Bank (SVB) run in 2023 and could impact the entire financial market.

Additionally, BIS is concerned about stablecoins potentially weakening monetary and fiscal policy. If the public shifts large amounts of bank deposits into stablecoins during high interest rates, banks’ funding bases could be destabilized. To mitigate such risks, some policymakers are considering restricting interest payments on stablecoins or enabling regulated issuers to access central bank lending facilities or deposit insurance mechanisms, balancing digital payment functions with security.

Regulatory progress varies; decentralized wallets pose illegal financing loopholes

Although major economies worldwide are pushing for stablecoin regulation, progress is uneven and standards are lacking. The Financial Stability Board (FSB) Chair and Bank of England Governor Andrew Bailey recently mentioned that the development of international rules has stalled.

In the U.S., Congress is advancing the CLARITY Act, which has passed the House and is now under review by the Senate Banking Committee led by Chairman Tim Scott and the Agriculture Committee led by Chairman John Boozman. While some senators have reached compromises on stablecoin yields, disagreements remain over DeFi regulation and professional standards.

Pablo Hernández de Cos specifically points out that the use of permissionless, public blockchains and non-custodial wallets means much activity occurs outside AML (Anti-Money Laundering) and CTF (Counter-Terrorism Financing) monitoring. Without targeted safeguards at on-off ramps, stablecoins could easily become tools for illicit funds.

This cross-border nature makes regulation by any single jurisdiction less effective. If legal frameworks fracture across jurisdictions, issuers may relocate operations to more lenient regions. Such “regulatory competition” complicates tracking illicit financial flows and hampers risk mitigation.

Europe and the U.S. accelerate deployment; fiat-backed stablecoin race heats up

In the face of tightening regulation, European countries are actively adjusting strategies. French Finance Minister Roland Lescure noted that the euro stablecoin market is currently very small compared to the dollar, which he finds unsatisfactory. He urges the European banking industry to expand issuance of euro-pegged stablecoins and tokenized deposits to reduce reliance on foreign currencies.

France’s central bank Vice Governor Denis Beau recommends that the EU further amend the Markets in Crypto-Assets Regulation (MiCA) to restrict the use of non-euro stablecoins in everyday payments, aiming to reduce regulatory arbitrage during stress periods. Meanwhile, Swiss banks like UBS have launched a Swiss franc stablecoin pilot in early April 2026, seeking to integrate blockchain payments into a regulated financial system.

Despite regulatory concerns, stablecoin adoption in the real world continues to grow. A BVNK survey of over 4,600 respondents across 15 countries shows that 54% held stablecoins in the past year, and 56% plan to acquire more.

For some freelancers or e-commerce sellers, stablecoin payments account for 35% of their annual income. This practical demand fuels the potential for more currency-pegged tokens. Circle CEO Jeremy Allaire highlights the huge opportunity for a renminbi stablecoin and predicts China may launch related products within 3 to 5 years, despite current strict bans on offshore issuers pegging stablecoins to the renminbi. The future of stablecoins remains at the intersection of technological innovation and global financial security challenges.

• Related news: Circle CEO: Renminbi stablecoins hold huge business opportunities; predicts China will launch within 5 years*