The Bank for International Settlements has published its annual report, sharply criticizing the current stablecoin model. According to the organization's experts, existing "stablecoins" lack the key attributes of full-fledged money. Moreover, their further proliferation could increase fragmentation of the global financial system and create serious risks for countries with weak national currencies.

The regulator's main argument is that stablecoin settlements are not conducted directly or indirectly on the balance sheets of central banks. As a result, issuers cannot guarantee seamless token-to-fiat exchange at par value under any market conditions. The redemption frictions make these digital assets more akin to exchange-traded funds than to a reliable means of payment.

The document also focuses on the technological issues of open blockchains. Experts point to deep fragmentation between Layer‑1 and Layer‑2 networks, causing the same stablecoin to effectively lose its fungibility across different protocols. To this, add the risks of non-compliance with financial monitoring standards due to the pseudonymity of non-custodial wallets, as well as opaque governance and blurred issuer accountability.

The stablecoin market capitalization reached $320 billion by the end of May. However, the Bank for International Settlements warns that widespread adoption of such assets could increase funding costs for traditional banks and constrain lending to the real economy. Of particular concern is the phenomenon of dollarization through stablecoins: growing demand for digital dollars in countries with vulnerable economies could destabilize cross-border capital flows and undermine those nations' monetary sovereignty.

As an alternative to volatile crypto-dollars, the Bank proposed developing strictly regulated asset tokenization infrastructure. Notably, this is not the first such criticism from the organization: back in April, BIS representatives called for global regulation of the sector, stating that stablecoins in their economic nature are much closer to investment instruments than to traditional mediums of exchange.