BIS warns rapid growth of dollar-backed stablecoins could threaten credit and financial stability

The Bank for International Settlements warned Monday that the rapid growth of dollar-backed stablecoins could have “material consequences” for credit provision, financial stability and monetary policy if they begin to compete meaningfully with conventional money, and said policymakers need coordinated global rules to limit the risk of destabilizing runs.

In a speech titled “Stablecoins: framing the debate” at a Bank of Japan seminar in Tokyo, BIS General Manager Pablo Hernández de Cos said the issue is no longer confined to crypto markets. “If stablecoins were to compete meaningfully with conventional forms of money, there would be material consequences for credit provision, financial stability, financial integrity, monetary policy and fiscal policy,” he said.

The warning lands as the sector reaches a scale that makes it harder for regulators and central banks to treat as niche. Hernández de Cos said the global stablecoin market cap stood at about $315 billion in early April 2026. About 98% of stablecoins are denominated in U.S. dollars, the BIS said, tying the sector closely to dollar funding markets. Reuters, summarizing the speech, reported that Tether and Circle account for roughly 85% of the market.

The BIS also highlighted how stablecoins are being used. Hernández de Cos said transaction volumes reached about $35 trillion in 2025, though payment-related flows were only about $390 billion over the year. That gap matters to the BIS’s broader argument that the instruments are not functioning like ordinary money in day-to-day commerce. Discussing the two largest issuers, Tether and Circle, Hernández de Cos said redemption frictions and deviations from par — meaning cases where a token does not trade exactly at $1 — make them resemble securities more than money. “In this respect, they currently operate more like exchange-traded funds than like money,” he said.

The central bank concern is not that one stablecoin event would immediately topple banks. It is that large-scale redemptions could force issuers to sell reserve assets quickly, putting pressure on Treasury markets and short-term funding conditions and, through those channels, affecting credit provision more broadly. The BIS’s 2025 Annual Report had already warned that stablecoin issuers’ Treasury holdings could become a source of market stress if redemptions triggered asset sales.

Hernández de Cos said the risk of stablecoin runs could be reduced if regulators gave non-bank stablecoin issuers access to deposit-insurance-type arrangements or central bank liquidity facilities, but only with “prudent regulatory safeguards.” That is a notable suggestion because such backstops are usually tied to heavily regulated parts of the financial system.

Reuters also reported that the BIS stressed the “critical importance” of global coordination, warning that differing national rules could lead to fragmentation and regulatory arbitrage, where firms shift activity to the least restrictive jurisdictions. For a market that is overwhelmingly dollar-based but operates across borders, that concern is central to the policy debate.

The BIS, based in Basel, Switzerland, serves as a forum for central banks and financial supervisors, and its assessments are closely watched by regulators and markets. Its intervention matters because it frames stablecoins not simply as a crypto product but as a growing part of the financial plumbing that could transmit stress into mainstream markets.

There is already a real-world example of the kind of spillover central banks worry about. In March 2023, USD Coin, or USDC, temporarily lost its dollar peg after the collapse of Silicon Valley Bank exposed part of the stablecoin’s reserve holdings to stress in the banking system. The episode showed how banking turmoil can feed into stablecoin redemptions and price dislocations.

The BIS’s message in Tokyo was narrower than a prediction of imminent crisis, but broader than a crypto-specific caution. With the market now at $315 billion, overwhelmingly dollar-denominated and dominated by two issuers, the institution is arguing that stablecoins have become large enough to matter for funding markets, credit creation and the conduct of policy — and that regulators need to treat them accordingly.