BIS warns stablecoins are more like ETFs than actual money, and they're creating FX risk
Key takeaways
- But the Bank for International Settlements' (BIS) latest annual report is throwing cold water on that narrative.
- Whether it's a physical bill or a bank deposit, it's expected to be worth exactly its face value.
- Secondary-market prices of tokenized versions of fiat currencies deviate from par, though mostly moderately.
Summary Show The Bank for International Settlements (BIS) argues that stablecoins function more like exchange-traded funds than true money, as their prices often deviate from par and redemptions can be slow or uncertain.Stablecoin transfers "settle neither directly nor indirectly on central bank balance sheets," and "they cannot currently ensure exchange at par across issuers and blockchains under all conditions," BIS said.The report warns that dollar-pegged stablecoins are accelerating dollarization in vulnerable economies, undermining local currencies and evading traditional capital controls.The crypto industry has long pitched stablecoins, tokens pegged to fiat currencies, as the future of blockchain-based money and payments. But the Bank for International Settlements' (BIS) latest annual report is throwing cold water on that narrative.
The report argued that stablecoins are acting less like money and more like exchange-traded funds (ETFs) or other alternative investment vehicles, whose units allow traders to gain exposure to a wide range of assets held by the fund.
The hallmark of true money is that it is accepted as a means of payment "with no questions asked." When you pay with dollars at the grocery store, malls, airports, hotels, or just about anywhere, nobody questions its legitimacy or its value. Whether it's a physical bill or a bank deposit, it's expected to be worth exactly its face value.