BIS Report Highlights Deficiencies in Stablecoin Architecture

The Bank for International Settlements (BIS) has published its Annual Economic Report, which includes a chapter arguing that stablecoins lack the fundamental monetary properties required to function as reliable payment instruments.

The report, co-authored by Frank Smets and Gaston Gelos, highlights four structural deficiencies in stablecoins operating on public, permissionless blockchains: redeemability, liquidity elasticity, interoperability, and resilience against financial crime.

Gelos, the BIS Deputy Head of the Monetary and Economic Department, stated that stablecoins depend on the stability provided by central banks to function smoothly.

The BIS proposes an alternative framework built around a 'unified ledger,' where tokenized central bank reserves would sit at the foundation of the system, providing the same singleness guarantee that stablecoins currently lack.