Bank for International Settlements: Stablecoins do not meet currency standards, making it difficult to become a pillar of the future financial system

The latest report from the Bank for International Settlements (BIS) points out that stablecoins have failed to pass the three key tests required to become a pillar of the monetary system: uniqueness, resilience, and integrity, and therefore cannot be regarded as true currency.

The report released on Tuesday evaluated the new generation of financial technologies, stating that the role of innovations such as stablecoins in the future monetary system remains unclear. The report pointed out that, despite the advantages of stablecoins such as programmability, pseudonymity, and user-friendliness, they perform poorly in measuring the three ideal characteristics of sound monetary arrangements, even though they may offer lower costs and faster speeds in cross-border payments.

Specifically, stablecoins have structural defects in elasticity testing. Taking USDT as an example, its issuance requires full upfront payment, which imposes a "prepaid cash constraint." In terms of uniqueness, stablecoins are usually issued by centralized entities that may set different standards and do not necessarily provide the same settlement guarantees, which leads to them potentially trading at different exchange rates, undermining the uniqueness of the currency.

In addition, stablecoins also face significant issues in promoting the integrity of the monetary system. Due to the inconsistency among issuers in implementing KYC and AML guidelines, it is difficult to effectively prevent financial crimes.

The BIS believes that stablecoins could pose risks to the global financial system by undermining government monetary sovereignty (sometimes through "covert dollarization") and facilitating criminal activities. Although the use of stablecoins has increased in certain specific situations (such as in countries with high inflation, capital controls, or difficulties in obtaining dollar accounts), they should not be equated with cash.

However, the BIS holds a positive attitude towards tokenization technology, believing it has revolutionary potential in areas such as cross-border payments and the securities market. The report points out that tokenization platforms centered around central bank reserves, commercial bank currencies, and government bonds may lay the foundation for the next generation of currencies and financial systems.

The release of this report had a certain impact on the market. The stock price of USDC stablecoin issuer Circle fell sharply after the report was released, dropping more than 15%, after the stock had previously reached a historic high of $299.