BIS Declares War on Stablecoins: ’Fundamentally Broken’ for 21st Century Finance
The Bank for International Settlements just dropped a bombshell on crypto's darling innovation—and TradFi isn't rushing to disagree.
Stablecoins face existential reckoning
The so-called 'central bank for central banks' tore into dollar-pegged tokens this week, calling them a square peg in the round hole of modern monetary systems. Their verdict? A systemic mismatch that could trigger the next liquidity crisis.
BIS researchers highlighted three fatal flaws: volatility masking, settlement risks, and what they cheekily termed 'algorithmic alchemy.' The report dropped just as Tether's USDT notched another $2B in minting—because nothing says 'stable' like exponential supply growth during market turmoil.
Meanwhile, legacy banks quietly sip champagne. After all, why innovate when you can regulate competitors into oblivion?
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Despite their popularity in cross-border transactions, the BIS recommends limiting stablecoin usage to tightly governed roles. It insists that lessons from past monetary crises must not be forgotten in the rush toward digital finance.
Interestingly, the report was far more positive about tokenization, calling it a promising tool to upgrade — rather than replace — the existing financial architecture.
Markets reacted swiftly. Shares of Circle (CRCL), issuer of the USDC stablecoin, plunged over 15% following the release.
