BIS Says Stablecoins Resemble ETFs and Could Increase Currency Risk

The Bank for International Settlements has warned that current stablecoin designs fall short of key monetary functions. In its 2026 Annual Economic Report, the central-bank organization said redemption frictions make the tokens resemble exchange-traded fund shares more than a practical means of payment.

The assessment matters because stablecoins increasingly connect public blockchains with conventional financial markets. The BIS acknowledged their potential for programmable payments and atomic settlement, but said wider adoption could create risks for bank funding, credit provision, monetary policy and financial integrity.

Foreign-exchange exposure is a central concern. The report said 99.4% of fiat-backed stablecoins by market value are pegged to the U.S. dollar. In emerging and developing economies, demand for these foreign-denominated tokens could alter capital flows, affect exchange-rate dynamics and challenge monetary sovereignty—a process the BIS described as “stablecoin dollarisation.”

The BIS also pointed to fragmentation, deviations from par and uneven cross-border performance after fees, spreads and conversion costs. Stablecoin reserves, meanwhile, are often concentrated in short-term government debt, bank deposits and reverse-repurchase agreements, linking issuer activity to traditional money markets.

For policymakers, the BIS proposed strengthening safeguards around existing stablecoins while bringing tokenization into the established two-tier monetary system anchored by central-bank money. Suggested protections include capital requirements for issuers and liquidity standards for reserve assets.