BIS's recent annual report explores stablecoins and AI developments.
By Omkar Godbole, AI Boost|Edited by Jamie Crawley Jun 29, 2026, 8:51 a.m. 3 min readMake preferred on Share this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on BIS asserts stablecoins are akin to ETFs.SummaryShow- The Bank for International Settlements (BIS) contends that stablecoins operate more like exchange-traded funds than actual money, as their values frequently stray from par and redemptions can be slow or unpredictable.
- According to BIS, stablecoin transfers "do not settle directly or indirectly on central bank balance sheets," and they "cannot currently guarantee exchange at par across issuers and blockchains under all circumstances."
- The report cautions that dollar-pegged stablecoins are promoting dollarization in fragile economies, undermining local currencies and bypassing conventional capital controls.
The cryptocurrency sector has consistently promoted stablecoins, which are tokens linked to fiat currencies, as the future of blockchain-based currency and transactions. However, the Bank for International Settlements' (BIS) latest annual report challenges that view.
This report suggests that stablecoins are functioning less like currency and more like exchange-traded funds (ETFs) or other investment vehicles, which allow traders to gain exposure to various assets within the fund.
True money is characterized by its acceptance as a payment method "without question." When using dollars in stores, airports, hotels, or nearly any location, their validity and value are not questioned. Whether in physical form or as a bank deposit, their worth is expected to equal their nominal value.
However, the prices of tokenized fiat currency versions can diverge from par, albeit usually slightly. This behavior parallels that of ETFs, which often trade at a small premium or discount to the net asset value of the fund.
Furthermore, redemptions are not as seamless as commonly believed, meaning that investors converting stablecoins back to cash may experience delays or uncertainties, similar to potential delays or costs involved in redeeming ETF shares based on the fund's structure.
"Redemption frictions are common, indicating that current stablecoin designs resemble exchange-traded fund (ETF) shares rather than means of payment," the report noted.
Crucially, stablecoin transfers "do not settle directly or indirectly on central bank balance sheets," and they "cannot currently guarantee exchange at par across issuers and blockchains under all conditions." This contrasts with bank deposits, which are ultimately supported by access to central bank funds.
BIS posits that the value of a stablecoin is influenced by the market's trust in the issuer's reserves and redemption process, rather than a secure, guaranteed claim on the monetary system, as is the case with bank deposits.
Moreover, stablecoins do not function as money in the cash-in-advance model, where an issuer creates a new token only after receiving an equivalent cash deposit, according to BIS.
This requirement for 100% pre-funding restricts issuers from flexibly increasing supply to address economic demands, unlike commercial banks, which can issue loans to create new deposit money without waiting for a customer to deposit cash first.
Foreign exchange challenges
Cryptocurrency was envisioned as an alternative to fiat currencies, particularly the dollar. However, stablecoins are contributing to greater dollarization, according to BIS.
The report observed increasing flows of non-dollar currencies into US dollar-pegged stablecoins, which can weaken domestic currencies in the spot market. Additionally, these flows reveal friction in arbitrage between crypto markets and traditional foreign exchange (FX) markets, potentially increasing the costs of acquiring dollars through the FX swap market.
BIS describes this situation as a new, expedited variant of an old issue: deposit dollarization, where households create foreign-currency deposits during times of macroeconomic instability in their home countries. The same factors apply, as high inflation and sovereign distress lead to larger inflows into foreign stablecoins. Once dollarization becomes established, BIS notes, it can persist for years.
The challenge with managing stablecoin dollarization lies in enforcement. Several nations, especially those in emerging markets, have already implemented restrictions on cross-border stablecoin transactions. However, BIS argues that such measures "are likely to be imperfect due to the digital bearer-like nature of tokens and the existence of unhosted wallets."
This means that capital controls that function adequately on conventional bank deposits do not apply seamlessly to self-custodied, borderless tokens.
StablecoinsAI Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards. For more information, see CoinDesk's full AI Policy.Latest Crypto News- 1Crypto exchange BitMEX removes CEO, CFO and head of growth1 hour ago
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