BIS Warns on Stablecoins: Are They Flirting With Collapse Before Global Rules Arrive?

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The BIS Wants Tighter Stablecoin Rules. But Is It Already Too Late?

Key Takeaways

  • The stablecoin market has reached ~$315 billion, with Tether and Circle controlling 85% between them.
  • BIS chief warned both dominant stablecoins behave more like ETFs than actual money, regularly breaking their $1 peg in secondary markets.
  • Without coordinated global rules, firms will simply relocate to the most permissive jurisdiction available.
  • Proposed fixes – central bank lending access, deposit insurance, interest payment bans – would effectively pull stablecoins inside the traditional banking system.

The stablecoin market is now worth around $315 billion, largely supported by short-term government debt and bank deposits. These digital currencies are used for payments across many countries. It’s no longer a matter of *if* this market should be regulated, but *who* will create those regulations and whether they can reach an agreement before a problem arises.

At a recent seminar in Tokyo, Pablo Hernández de Cos, head of the Bank for International Settlements, issued a strong warning: without a globally coordinated set of rules for stablecoins, the financial system could face significant risks. This market, currently valued at around $315 billion, has developed largely without oversight from any single regulatory body.

When Hernández de Cos made his statement, the United States was still working on its own laws for digital assets – the CLARITY Act is anticipated in 2026 – and the Bank of England’s Andrew Bailey had already pointed out that global efforts to create standards for stablecoins had significantly slowed down in the last year. This lack of progress is exactly why the BIS’s involvement is so important.

The ETF Problem Nobody Wants to Name

Pablo de Cos focused his comments on Tether (USDT) and Circle (USDC), which control about 85% of the stablecoin market. He believes these aren’t functioning like true money, but more like investments such as stocks or exchange-traded funds. This is because fees and rules around redeeming these tokens for dollars cause their price to often fluctuate away from the expected $1 value – something a stable currency shouldn’t do.

Tether is currently worth about $186 billion, and Circle’s USDC is around $78.8 billion. This large size means the assets backing these tokens – mostly short-term government debt and bank deposits – create a significant risk. If many token holders tried to cash out at the same time, the companies issuing the tokens might have to quickly sell their assets, potentially at a loss. This could actually *cause* problems in the bond and banking markets, instead of just existing alongside them.

When regulators talk about “contagion risk,” they’re referring to how problems in one part of the financial system can quickly spread to others – and this is a real danger, not just a possibility. The recent issue with USDC in 2023, caused by its connection to Silicon Valley Bank, showed how rapidly trust can be lost and how a crisis involving stablecoins can affect traditional banks and financial institutions.

The Regulatory Arbitrage Trap

As a crypto investor, one thing that really worries me is where these stablecoin companies decide to base themselves. If there aren’t consistent rules worldwide, they’ll naturally gravitate to places with the least amount of regulation – it’s just good business. We’re already seeing this with places like Singapore and Abu Dhabi being proactive. Europe has MiCA in place, which is great, but the US is lagging behind. This creates a loophole where companies can shop for the weakest rules, which completely defeats the purpose of having regulations in the first place. It’s a real risk to the whole system.

The issue of rapidly moving and difficult-to-track money isn’t new – it’s similar to what led to the growth of offshore banking years ago. However, stablecoins make this problem worse because they move funds much faster and are harder to trace than traditional money transfers. Unlike banks, companies that issue stablecoins can easily change where they operate, and the assets that support these tokens aren’t always subject to the same rules and oversight as the company itself.

Bringing Stablecoins Inside the Tent

As I see it, Pablo de Cos is proposing that stablecoin issuers, particularly those that are regulated, may need the same safety nets that traditional banks have – things like deposit insurance or access to loans from the central bank. He also supports a ban on stablecoins offering interest. This is likely to discourage people from moving their money out of banks and into stablecoins just to earn a higher return, especially when interest rates are high.

These proposals go beyond simply overseeing stablecoins; they fundamentally change how they operate. They would give stablecoin issuers benefits similar to those enjoyed by banks, while also requiring them to meet certain banking standards. Some argue this essentially creates a new type of financial institution that gains the credibility of a bank without the traditional costs and regulations associated with physical branches, loans, or reserve requirements. While the Bank for International Settlements aims to control stablecoins, the proposed approach seems more like integrating them into the existing banking system.

The Market Is Not Listening

Despite any worries from official sources, people trading online reacted positively to the speech. Data from Stocktwits showed growing optimism about Tether immediately afterward, possibly even *because* of the increased regulatory scrutiny. Sentiment towards USDC was more negative, likely due to concerns about its past stability issues in 2023.

As an analyst, I’ve noticed a really interesting pattern. It’s not a coincidence that regulators are increasingly focused on stablecoins while the market seems to be responding… almost not at all. In fact, the louder the warnings from central banks, the more some crypto investors see it as a sign that stablecoins are becoming a legitimate part of the financial system. They’re interpreting concern as confirmation, which is a bit counterintuitive, but it highlights how these investors view regulatory attention as a form of validation.

It’s uncertain whether international agreements on market regulations will be established before the next financial crisis. Considering how slowly these agreements usually come together, the outlook isn’t very reassuring.

This article is for informational purposes only and shouldn’t be considered financial, investment, or trading advice. Coindoo.com doesn’t support or suggest any particular investment or cryptocurrency. Before making any investment choices, be sure to do your own research and talk to a qualified financial advisor.

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2026-04-21 11:32