The BIS stablecoin feasibility concerns aired by Bank for International Settlements General Manager Pablo Hernández de Cos at the Jackson Hole Economic Symposium have landed at an awkward moment: global stablecoin supply has climbed to $308 billion, according to Bitcoin News. Which leaves an obvious question: if stablecoins are structurally flawed at scale, why is the market growing so fast?
Hernández de Cos used his Jackson Hole address to lay out what he sees as fundamental problems with stablecoins, including concerns about redeemability, interoperability, and financial integrity. He also pointed to the heavy skew toward the US dollar, arguing this creates risks around payments sovereignty for countries outside the dollar zone.
Tokenised Deposits as the Preferred Alternative
The BIS General Manager’s preferred alternative is tokenised deposits, a model that delivers blockchain-style settlement speed and transparency while keeping funds inside the regulated banking system. Where stablecoins are issued and backed by private companies, tokenised deposits represent the deposits held within a regulated financial institution, and are subject to the same oversight as conventional banking infrastructure.
The distinction matters for what Hernández de Cos frames as a governance problem. Stablecoins run on public blockchains that are not regulated in the way banking infrastructure is, he argued, which could create openings for misuse. He also pointed to fragmentation: with multiple stablecoin variants in circulation, a user holding USDT and a merchant accepting only USDC face a conversion step that can involve fees or off-par trades.
Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research, offered a more balanced read. ‘Stablecoins and tokenized deposits may look similar on the surface, but they represent very different models of money,’ he said. ‘Tokenized deposits keep funding and customer relationships inside the banking system, while stablecoins offer greater interoperability outside it. At scale, the real winner may be determined less by technology and more by which model better fits the use case.’
BIS Stablecoin Feasibility Concerns Meet a Crowded Market
The Bank for International Settlements has been pushing the tokenised deposit model for some time. Its Project Agorá was designed to explore whether tokenised deposits can improve cross-border payments within the existing financial system, and the institution has been an active proponent of keeping digital money within established frameworks.
Momentum is building on the private sector side too. A group led by JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo plans to launch a tokenised deposit network next year via The Clearing House. Other platforms are also emerging, which Hernández de Cos acknowledged introduces its own fragmentation risk into the tokenised deposit space, a tension that somewhat undercuts the argument that deposits offer a tidier ecosystem than stablecoins.
His position, nonetheless, is that keeping deposits within the existing financial framework is the best policy for most global payments, with stablecoins left to serve niche functions. That is a coherent regulatory view. Whether the market will cooperate is another matter.
The rapid growth of stablecoin supply, now at $308 billion, reflects a degree of consumer and institutional entrenchment that is difficult to reverse through policy preference alone. Stablecoins have found genuine traction in cross-border remittances, decentralised finance, and markets where access to traditional banking is limited. Those use cases do not disappear because a central bank consortium prefers a different architecture.
Hernández de Cos is not arguing that stablecoins will vanish. He is arguing that they should not become the backbone of global payments. The harder question is whether the infrastructure being built around tokenised deposits, from Project Agorá to The Clearing House network, can develop quickly enough and openly enough to offer a credible alternative before stablecoin network effects become decisive.
