The head of the Bank for International Settlements made an important statement. Pablo Hernández de Cos criticized modern stablecoins. He considers them an unreliable means for mass payments. Stablecoins are currently unsuitable for the global economy. The foundation of the digital system should be tokenized deposits. The Bank for International Settlements acknowledged the widespread use of stablecoins. However, the expert questioned their real usefulness. Stablecoins cannot fully perform the function of money.
The head of the Bank for International Settlements highlighted several issues. Stablecoins create risks for overall financial stability. Different tokens have weak technical compatibility. Controlling anti-money laundering rules is very difficult. A separate risk concerns countries outside of America. The widespread use of dollar stablecoins undermines national central banks. Local economies become dependent on foreign policies.
Tokenized deposits offer a more direct path for development. They preserve the fundamentals of the traditional monetary system. The head of the Bank for International Settlements does not call for abandoning stablecoins. Stablecoins may be suitable for specific narrow tasks. Everyday payments are more sensibly built around tokenized deposits. Currently, there are no large cross-border systems for deposits. Banks from different jurisdictions need a unified infrastructure.
A multitude of complex management issues need to be resolved. Legal regulation of tokenized deposits requires serious refinement. Meanwhile, regulators from New York are tightening control over stablecoins. The New York State Department of Financial Services has put forward an initiative. The agency proposed to tighten requirements for stablecoin issuers. The regulator intends to supplement existing token issuance rules. The new norms will affect assets backed by national currencies.