BIS report: stablecoins fail par-redemption test on four structural axes, pushes tokenized-reserve fix

The Bank for International Settlements has put a number on what it sees as a structural flaw in stablecoins: they fail the test of “singleness,” meaning they cannot reliably be redeemed at par with central bank money at all times. The claim sits in Chapter III of the BIS Annual Economic Report, published June 23 and co-authored by Frank Smets and Gaston Gelos.

Four failure points, mapped

The report breaks the singleness gap into four discrete weaknesses specific to stablecoins on permissionless chains. Redeemability tops the list — face-value cash-out is not always guaranteed. Liquidity elasticity is the second flaw: unlike central bank money, stablecoin supply cannot expand or contract on demand during stress events.

Interoperability is the third gap, with liquidity fragmented across competing stablecoin ecosystems rather than unified. Fourth is resilience against financial crime, which the BIS flags as a persistent, unresolved vulnerability on open blockchains.

Gaston Gelos, BIS Deputy Head of the Monetary and Economic Department, reinforced the point on a Reuters podcast, stating that stablecoins and tokenized instruments depend on central bank stability to function smoothly rather than standing on their own.

Sovereignty and bank-funding exposure

The report extends the analysis to macro risk. Dollar-denominated stablecoins circulating widely in emerging markets could erode monetary sovereignty, sidelining local currencies with tokens that sit outside conventional oversight.

On the banking side, the BIS warns that deposit migration into stablecoins could strip banks of a cheap funding source, tightening their capacity to extend credit. The report’s own modeling, however, projects only a modest hit to broader economic growth from this channel.

The BIS counter-proposal: unified ledger

Rather than dismissing tokenization, the BIS wants its upside — programmability, atomic settlement, composability — absorbed into the existing two-tier monetary system via a “unified ledger” architecture. Tokenized central bank reserves would form the base layer, supplying the singleness guarantee stablecoins currently lack, with commercial banks and regulated entities issuing tokenized deposits and payment instruments on top.

Project Agora, one of the BIS innovation hub’s public-private cross-border payments initiatives, is cited as a working example of this model. The chapter closes by pushing for coordinated global regulation of existing stablecoins rather than continued fragmentation across jurisdictions — a signal the BIS wants convergence, not just national-level rulemaking.

Read more: Circle Stock Sinks 17% as New Stablecoin OUSD Copies Hyperliquid’s Model

Sources

• cryptobriefing.com