Stablecoins face 'moneyness' limits, pose policy challenges

Pablo Hernández de Cos, BIS General Manager, framed the debate on stablecoins at a Bank of Japan seminar. He highlighted their technological potential but also their current limitations and potential macro-financial implications.

Digital tokens, limited real-world use

Stablecoins are cryptoassets designed to maintain a stable value against a reference asset, most commonly the US dollar.

Leveraging tokenisation, they offer attractive technological features for digital finance, including integration with smart contracts for programmability and atomic settlement, which eliminates counterparty risk.

Their primary use cases include providing an on- and off-ramp for the crypto ecosystem, supporting complex trading strategies, and serving as collateral.

They also hold potential for faster cross-border payments and as a store of value in emerging markets.

Despite annual transaction volumes of around $35 trillion in 2025, their use for real economy transactions is modest, with payment-related flows estimated at $390 billion.

The global market capitalisation remains small at $315 billion as of April 2026, with 98% denominated in US dollars.

The elusive quest for 'moneyness'

For stablecoins to qualify as an alternative means of payment, they must achieve "singleness" and "interoperability.

" Singleness implies perfect substitutability at par across platforms, a feature underpinned by central bank money in the two-tier system.

Stablecoin transactions, however, do not settle on a central bank's balance sheet, making par payments not assured and exposing them to run risk without robust safeguards.

Interoperability is constrained by the underlying public, permissionless blockchains, which face incentive compatibility issues leading to network fragmentation and increased transaction fees.

These structural features undermine the network effects crucial for money, suggesting stablecoins may remain niche instruments.

A digital promise, a monetary dilemma

Stablecoins offer technological promise, but their current design limits their utility as reliable money.

The inherent tension between decentralisation and the indispensable central bank monetary anchor remains unresolved.

Without significant evolution and robust regulation, widespread adoption as a core payment instrument appears distant and poses systemic risks.