BIS Warns of Stablecoin Risks to Financial Systems

Date: August 11, 2025

The rapid growth of stablecoins, cryptoassets designed to maintain a stable value, is creating significant policy challenges for the financial risk community, according to a recent BIS Bulletin (No. 108, July 11, 2025).

• https://www.bis.org/publ/bisbull108.pdf

With market capitalisation soaring to $255 billion and active stablecoins increasing from 60 to over 170 in less than a year, their integration with traditional finance demands urgent attention.

Key Risks Highlighted

1. Financial Stability Risks:
1. Stablecoins’ growing linkages with traditional financial systems, particularly through investments in US Treasuries and bank deposits, could lead to spillovers.
2. For instance, a $3.5 billion inflow into stablecoins can lower Treasury bill yields by 2.5–5 basis points, while outflows may trigger fire sales, amplifying market volatility.
2. Illicit Activity Concerns:
1. Operating on permissionless blockchains, stablecoins pose challenges for AML/CFT compliance due to their pseudonymous and borderless nature, increasing risks of misuse by criminal entities.
3. Monetary Sovereignty Threats:
1. The dominance of US dollar-pegged stablecoins (99% of market value) and their rising cross-border use ($400 billion quarterly trading volume) could undermine monetary policies and foreign exchange regulations in non-US jurisdictions, especially in high-inflation economies.
4. Regulatory Gaps:
1. The “same risks, same regulation” principle falls short due to stablecoins’ unique features, necessitating tailored frameworks to address their volatility (some exceed bitcoin’s) and reserve management practices.

Policy Recommendations

• The BIS advocates for bespoke regulatory frameworks leveraging blockchain traceability to enhance integrity rules, particularly at interfaces with regulated finance.
• Strengthened liquidity risk management and international cooperation are critical to mitigate cross-border risks without compromising technological neutrality.

Call to Action

Financial risk professionals should monitor stablecoin developments closely, assess exposure to Treasury market dynamics, and advocate for robust regulatory measures. For detailed insights, you can refer to the BIS Bulletin at www.bis.org.

Source

https://www.bis.org/publ/bisbull108.pdf