Stablecoins Raise Risk of Bank Runs and Policy Breakdown, BIS Says
The Bank for International Settlements has escalated its warnings over the rapid rise of stablecoins, cautioning that dollar-pegged tokens are evolving into a parallel financial system that could weaken bank funding, disrupt monetary policy and introduce new risks to global markets.
Summary:
- BIS warns stablecoins are behaving more like securities than money.
- Growth of digital dollars threatens bank deposits and credit creation.
- Rising stablecoin demand could destabilize Treasury markets in a crisis.
In a speech delivered in Japan on April 20, BIS General Manager Pablo Hernández de Cos highlighted growing concerns that leading stablecoins such as USDT and USDC are no longer functioning purely as payment instruments.
Instead, they increasingly resemble financial products.
The issue centers on redemption frictions and occasional deviations from their $1 peg, which can cause them to trade more like exchange-traded funds than stable cash equivalents. This dynamic introduces liquidity risk, particularly during periods of stress when users rush to redeem tokens.
The BIS warned that such conditions could trigger runs similar to those seen in money market funds, potentially forcing central bank intervention.
Deposit Flight Pressures Banking System
At the core of the BIS concern is a structural shift in how money is held.
As households and institutions move funds into stablecoins, traditional banks risk losing a key source of low-cost funding: retail deposits. This trend, described as a “deposit-substitution mechanism,” has implications for lending and economic activity.
Without stable deposits, banks must turn to more expensive wholesale funding markets, increasing their cost of capital. In turn, that can constrain lending to businesses and consumers, creating a drag on economic growth independent of central bank rate decisions.
The effect is subtle but potentially far-reaching, particularly if adoption continues to accelerate.
Monetary Policy Transmission at Risk
Stablecoins may also weaken the effectiveness of monetary policy.
Central banks rely on the banking system to transmit interest rate changes to the broader economy. If a growing share of money sits outside that system – held instead in blockchain-based tokens – policy adjustments may take longer to influence borrowing, spending and investment.
The BIS described this as a “non-linear” risk, where the impact becomes more pronounced once adoption reaches a critical threshold.
The concern is particularly acute in emerging markets.
Dollar-backed stablecoins effectively introduce a parallel currency, limiting local central banks’ ability to manage inflation and liquidity. In extreme cases, this could erode monetary sovereignty as citizens shift toward digital dollars over domestic currencies.
Growing Link to Treasury Markets
The rise of stablecoins is also reshaping demand for U.S. government debt.
Issuers such as Tether and Circle hold large reserves in short-term Treasuries to back their tokens. Recent research suggests that inflows into stablecoins – roughly $3.5 billion in recent weeks – have contributed to modest declines in Treasury bill yields.
While that demand supports government financing, it also creates a potential vulnerability.
In the event of a large-scale redemption wave, issuers could be forced to liquidate Treasury holdings quickly. Such a scenario risks disrupting one of the world’s most important and liquid markets, amplifying financial stress beyond the crypto sector.
Push for Global Oversight
The BIS is advocating for coordinated international regulation to address these risks.
Officials have warned that without unified standards, stablecoin issuers may gravitate toward jurisdictions with weaker oversight, creating regulatory gaps and increasing systemic risk.
READ MORE: Sui Moves to Reclaim Stablecoin Profits With USDsui Rollout
A fragmented approach, they argue, could lead to a “race to the bottom,” where competition for innovation undermines financial stability safeguards.
The call for oversight reflects the growing scale of the sector, which is no longer confined to crypto trading but increasingly intersects with traditional finance.
A New Financial Layer Emerges
The BIS warnings underscore a broader shift in the global financial system.
Stablecoins are moving beyond their origins as trading tools to become widely used instruments for payments, savings and cross-border transactions. In doing so, they are beginning to compete directly with bank deposits and fiat currency systems.
For policymakers, the challenge is balancing innovation with stability.
For markets, the message is clear: the rise of digital dollars is no longer a niche development – it is a structural change with implications that extend well beyond crypto.
The information presented in this article is intended for informational purposes only and should not be interpreted as financial, investment, or trading advice. Coinspress.com does not promote or advocate for any particular investment strategy, asset, or cryptocurrency project. Cryptocurrency markets are highly volatile and unpredictable – always perform your own research and seek guidance from a qualified financial professional before making any investment decisions.
Alexander Stefanov
Reporter at CoinsPress
Alex is Editor-in-Chief of Coinspress and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
