BIS warns stablecoins must preserve trust in money

The next generation of the monetary and financial system should be built on safeguarding trust in money, the Bank for International Settlements said in a special chapter of its 2026 Annual Economic Report.

The chapter examines how digital innovation is reshaping finance, including through programmable platforms and instruments that perform money-like functions. It argues that tokenisation could improve payments and financial intermediation if introduced within existing institutional, legal and supervisory structures.

At the centre of the BIS analysis is the view that the current two-tier financial system should remain the foundation for reform. Under this model, central banks provide the monetary anchor, while commercial banks deliver services to households and businesses.

The report defines tokenisation as the digital representation of assets on programmable platforms and says it could create new forms of programmable payments. But it warns that the benefits of innovation depend on preserving confidence in the value and convertibility of money.

One section focuses on stablecoins, which the BIS says show some of tokenisation's promise but do not yet meet the essential tests of money. It argues that their current structure falls short on core properties, especially what it calls singleness, meaning different forms of money can be redeemed exactly at par against central bank money.

It also points to weaknesses linked to circulation on public, permissionless blockchains. These arrangements, according to the BIS, can undermine resilience against financial crime and undermine redeemability and interoperability across different ledgers.

Stablecoin risks

The broader economic effect of stablecoins may be limited in some scenarios, the report says, but wider adoption could still reshape bank funding and credit provision. Large-scale use could also raise financial stability concerns, depending on the composition of reserves, how the tokens are used, the regulatory treatment applied to them and the response of other parts of the financial system.

The BIS also highlights the international dimension. Strong global demand for stablecoins, many of which are denominated in US dollars, could make capital flows more volatile and put pressure on monetary sovereignty in countries with weaker economic fundamentals.

That concern goes beyond payment market design and touches on the role of domestic currencies in national financial systems. For policymakers, the message is that privately issued digital instruments could affect macroeconomic management if they reach significant scale.

Governments and regulators should respond on two fronts, the BIS says. First, they should address weaknesses in existing stablecoin arrangements, with the policy response depending on whether such instruments are widely used for payments or remain mainly investment vehicles.

Second, the technological features behind tokenisation should be brought into the established financial architecture rather than developed outside it. In the BIS view, that would allow authorities to adopt new tools while keeping the central bank anchor that underpins trust in money.

Unified ledger

A key concept in the chapter is the unified ledger, which the BIS describes as a shared venue where different forms of tokenised money could be integrated, allowing transactions to be programmed and settled within a coordinated structure.

Such a framework could support digital innovation without fragmenting the monetary system, the report says. The proposed arrangement would keep central bank money and commercial bank money connected while enabling tokenised transactions to move more efficiently among participants and use cases.

The BIS cites correspondent banking as a practical example of how this model could be applied. It cited Project Agorá, a public-private prototype involving eight central banks and more than 40 regulated institutions, as an example of possible improvements in wholesale cross-border payments.

Under the prototype, participants use a shared platform with a unifying ledger for tokenised commercial bank deposits and separate jurisdiction-specific ledgers for tokenised central bank reserves. The structure is intended to show how tokenised forms of money might interact within an organised framework rather than through disconnected private systems.

Pablo Hernández de Cos, General Manager of the BIS, commented on the broader policy approach set out in the chapter.

"By integrating digital innovation such as tokenisation into the existing financial architecture, authorities can shape the future of money, the economy and the financial system in the public interest while preserving trust. Achieving this will require domestic and international coordination and cooperation," Hernández de Cos said.