Pablo Hernández de Cos, General Manager of the Bank for International Settlements, said Monday that stablecoins present both “opportunities and challenges,” urging coordinated efforts to move forward.
The Pros And The Cons
Stablecoins are cryptocurrencies designed to maintain a stable value by pegging it to a reserve asset. Most popular stablecoins, such as Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC), are fiat-backed, holding cash or U.S. Treasuries to ensure a 1:1 redemption rate.
In a speech at a Bank of Japan seminar, Hernández de Cos highlighted the potential of stablecoins to improve cross-border payments and provide “convenient access” to the dollar and other foreign currencies. He also praised their instant settlement and simultaneous settlement capabilities.
“On the other hand, stablecoins pose significant macroeconomic and financial challenges, including their potential effects on credit supply, financial stability and monetary and fiscal policy, ” Hernández de Cos emphasized.
He particularly stressed their potential to enable “regulatory circumvention” and drive increased dollarization in emerging economies.
The Strategy Ahead
Hernández de Cos called for “coordinated progress” along two dimensions.
First, he proposed policy measures, such as guaranteeing redemption through robust regulation and supervision, implementing protections for coin holders, and considering access to central bank liquidity under “strict safeguards.”
Hernández de Cos then suggested incorporating the technological advancements of stablecoins into the existing two-tier financial system. He noted that central banks are investigating the use of tokenised deposits
“Central bank money can serve as an anchor of trust, helping to mitigate the fragmentation and integrity risks that would arise in a purely decentralised monetary system,” said the top executive of the “bank of central banks.”
Progress And Bottlenecks
In recent months, U.S. policymakers and experts have been increasingly advocating for clear laws to oversee the rapidly expanding stablecoin market.
The GENIUS Act, signed by President Donald Trump in July 2025, is a landmark legislation establishing the first federal regulatory framework for payment stablecoins.
However, things have hit an impasse over the question of yields. Coinbase Global Inc. (NASDAQ:COIN) withdrew its support for the cryptocurrency market structure bill earlier in January over a rule that would prohibit cryptocurrency platforms from paying rewards on idle stablecoin balances.
JPMorgan Chase & Co. (NYSE:JPM) CEO Jamie Dimon later argued that cryptocurrency companies offering rewards on stablecoin balances should face bank-like regulations.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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