Stablecoins need public backing to sustain trust at par
Stablecoins lack the institutional backing that sustains bank money, Iñaki Aldasoro argues in Bank for International Settlements (BIS) Paper No 175, published October 14, 2026. He locates monetary trust in settlement, funding discipline and public backstops rather than technology.
Promises need a settlement anchor
Aldasoro distinguishes money, which settles obligations, from credit, which promises future payment.
Central bank liabilities anchor a hierarchy connected by par: one-to-one conversion of deposits into central bank money.
Banks create deposits through lending; funding costs constrain expansion.
Regulation, deposit insurance, resolution and liquidity backstops sustain par without guaranteeing every issuer.
Stablecoins lack comparable support.
Direct redemption generally serves arbitrageurs, leaving ordinary holders reliant on secondary markets.
Issuance depends on dollar inflows rather than credit demand.
Wider acceptance might enable bank-like money creation, which Aldasoro argues requires supervision, capital standards and reporting obligations.
Dollar access divides the hierarchy
Dollar liabilities booked outside the United States reached roughly $14.7 trillion at end-2025, versus €3.2 trillion, £810 billion and ¥630 billion in the respective currencies.
Global foreign exchange turnover reached $9.5 trillion daily in April 2025.
Federal Reserve swap access is unequal: the C6 core expands to C14 with eight temporary recipients.
Others rely on reserves, the Foreign and International Monetary Authorities repo facility or International Monetary Fund support.
No global sovereign anchors these arrangements.
Technology cannot replace institutions
Aldasoro treats gold and bitcoin as attempts to escape issuer promises, not substitutes for elastic money.
He argues that immediate atomic settlement increases liquidity needs by eliminating netting.
TerraUSD's May 2022 collapse illustrates his warning that stablecoin promises require more than a redemption mechanism.
Source: Money and the architecture of trust
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