Banks move stablecoin plans forward as BIS questions their role

Despite the opinion expressed by the head of the Bank for International Settlements (BIS) that stablecoins do not qualify as money on a large scale, the largest banks in the world are shifting financial settlement and regular transactions to publicly accessible blockchains.

Addressing the Jackson Hole Economic Symposium on August 28, BIS general manager Pablo Hernández de Cos said that a framework based on tokenized deposits “looks more promising” than stablecoins. The officials at BIS have emphasized that tokenized deposits should be the backbone of modern systems of digital payments as banks transfer their activities to blockchains.

For banks, the dilemma is simple: should they adopt blockchain now, or wait for regulators to approve a more technologically advanced version of this innovative solution?

Where de Cos says stablecoins break down

De Cos centered his argument on three properties he says money must have: singleness, interoperability, and financial integrity.

In relation to the topic of singleness, he provided a simple example. If one person owns Tether’s USDT tokens and would like to transfer money to a recipient who only accepts USDC tokens from Circle, that person would first have to sell the USDT and purchase USDC. However, as the price of the coins can fluctuate in the market, the final value of the transfer may not equal one US dollar. The system does not guarantee that the two stablecoins are exchangeable in one-to-one transactions.

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