Latest news with #monetarysystem
Crypto Insight
3 days ago
- Business
- Crypto Insight
BIS says stablecoins fail as money, calls for strict limits on their role
A new report from the Bank for International Settlements (BIS) challenged the notion that stablecoins can serve as money in a modern financial system. According to the BIS Annual Economic Report 2025, stablecoins fail the fundamental tests of 'singleness,' 'elasticity' and 'integrity,' three critical criteria that define effective monetary instruments. The BIS described stablecoins as 'digital bearer instruments' that resemble financial assets more than actual money. 'Stablecoins perform poorly when assessed against the three tests for serving as the mainstay of the monetary system,' the report said. Unlike central bank-backed money, which is accepted 'at par' and requires no background checks, private entities issue stablecoins and often trade at fluctuating rates. This undermines the core principle of monetary singleness, the report claimed. Stablecoins fail elasticity and integrity tests Elasticity, the second test, is crucial for absorbing shocks and meeting large-value payment demands, BIS said in its report. It pointed out that 'any additional supply of stablecoins thus requires full upfront payment by its holders,' likening it to a 'strict cash-in-advance setup' that contrasts with the flexibility of modern banking systems, where central banks provide liquidity as needed. The third and perhaps most damning failure lies in the area of integrity. The report claimed that stablecoins' design, especially those transacted via unhosted wallets on public blockchains, makes them prone to financial crime. 'Stablecoins have significant shortcomings when it comes to promoting the integrity of the monetary system,' the BIS noted, emphasizing their vulnerability to money laundering, sanctions evasion and terrorist financing. Stablecoins should have a limited role While acknowledging the continued demand for stablecoins due to features like cross-border accessibility and lower transaction costs, the BIS argued that they should only play a limited, well-regulated role. 'Society can re-learn the historical lessons about the limitations of unsound money,' the report cautioned. 'Bold action by central banks and other public authorities can push the financial system along the right path, in partnership with the financial sector.' Circle, the company behind USDC, saw its stock drop more than 15% on Tuesday after the BIS report, hitting $222. CRCL shares had reached an all-time high of $299 on Monday. Despite its hard take on stablecoins, the BIS report praised tokenization as a 'transformative innovation' for the next-generation monetary and financial system. It said tokenization builds on the current financial system rather than replacing it. Some in the crypto community said it is 'no surprise' that the BIS paper was generally negative on stablecoins, given that it is a 'regulatory body owned by global central banks.' 'The BIS is hysterical in its opposition to crypto,' Jim Walker, chief economist at Aletheia Capital, wrote. 'The first criterion, backed by a central bank, should make it a laughing stock given the historical failures of those institutions around the world.' Source:
Finextra
4 days ago
- Business
- Finextra
BIS report pours cold water on stablecoin hype
They may be the current darling of the financial services world, but stablecoins fall short as a form of sound money and at best may "eventually play a subsidiary role in the hinterland of the financial system," according to the Bank for International Settlement. 0 Stablecoins have seen a surge in interest in recent months, with US regulators paving the way for adoption. big banks exploring rolling out their own tokens, USDC issuer Circle soaring on its market debut, and Citi predicting that the market will hit trillions within five years. Yet, while offering some promise on tokenisation, they are fundamentally flawed, says a report into the next generation monetary and financial system from the BIS, because they "do not stack up well against the three desirable characteristics of sound monetary arrangements and thus cannot be the mainstay of the future monetary system". These characteristics are the ability to deliver singleness of money (acceptance for payment at par), elasticity (timely discharge of obligations, preventing gridlock) and integrity (safeguarding against financial crime). Therefore, "besides acting as a gateway to the crypto ecosystem, their future role is unclear," says the report. In fact, without regulation they could be actively damaging, posing a risk to financial stability and monetary sovereignty. The BIS instead predicts that a tokenised unified ledger incorporating central bank money, commercial bank deposits and government bonds will lay the foundations of a tokenised monetary and financial system based on the time-tested principles of sound money. This trilogy can boost efficiency and open new possibilities in cross-border payments, securities markets and beyond, while maintaining the key principles of sound money that stablecoins fail in: singleness, elasticity and integrity. Hyun Song Shin, head, monetary and economic department, says: "Tokenisation of deposits and central bank money means that both the primary means of payment as well as the settlement function of central bank money can be integrated seamlessly on the same programmable platform. It has the potential to transform securities markets and its application to correspondent banking is especially promising." The BIS is already exploring this through Project Agorá, a collaboration led by the group with seven central banks and 43 private sector institutions to "test and develop tokenisation as the backbone of the future monetary and financial system," says Andréa M Maechler, acting head, BIS Innovation Hub. Read the report.
Bloomberg
18-06-2025
- Business
- Bloomberg
PBOC Chief Sees Currency Competition as Dollar Dominance Falters
People's Bank of China Governor Pan Gongsheng laid out in the clearest terms yet his vision for the future of a new global currency order after decades of dollar dominance, predicting a more competitive system will take root in the years to come. 'In the future, the global monetary system could continue to evolve toward a situation where a few sovereign currencies co-exist, compete and check and balance each other,' Pan said Wednesday in a keynote speech at the annual Lujiazui Forum in Shanghai.
Yahoo
17-06-2025
- Business
- Yahoo
Reserve's Nevin Freeman lays out ‘Plan A and B' for the monetary system at Monetarium 2025
Reserve's Nevin Freeman lays out 'Plan A and B' for the monetary system at Monetarium 2025 originally appeared on TheStreet. In an interview with TheStreet Roundtable, Nevin Freeman said Monetarium is the second annual gathering organized by Confusion Capital and the Reserve ecosystem. Freeman explained that Monetarium isn't limited to Reserve enthusiasts or asset-backed currency advocates. 'It's really for anybody who wants to have a deep conversation about the nature of monetary systems and who's willing to think about what is going to happen to the fiat system, what's going to happen to the US dollar,' he said. The conference is scheduled for June 18 to June 21 and will take place in Washington D.C. Addressing the first half of the framing question, Freeman outlined 'Plan A.' He said, 'How do we preserve the current system, how do we pay down the debt and preserve the state of the US dollar? Because as long as it works, it's a functional system.' Panels will dig into why Congress has struggled to balance the budget and control national debt — and whether politically difficult reforms can avert debt monetization. On the flip side, Freeman described 'Plan B' for attendees who conclude the current model won't hold. 'If we don't manage to do that, we have not as a society cracked that nut yet,' he said. Under Plan B, the conference will explore alternative monetary designs. 'Obviously there'll be some focus on asset-backed currency as one option, but we also have invited some other groups who have different ideas to compare and contrast.' Freeman highlighted expert sessions on historical precedents. Last year's agenda examined the gold standard's rise and fall; this year's will also probe the inner workings of the Federal Reserve. Attendees will learn why past reserve currencies failed and what those lessons mean for today's debt challenges. A final strand will trace the evolution of exchange-traded funds and consider how those market structures can inform decentralized token funds. Freeman summed up his excitement plainly: 'I'm super excited.' Reserve's Nevin Freeman lays out 'Plan A and B' for the monetary system at Monetarium 2025 first appeared on TheStreet on Jun 16, 2025 This story was originally reported by TheStreet on Jun 16, 2025, where it first appeared. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
22-05-2025
- Business
- Yahoo
Stablecoins Are About to Hit ‘Critical Mass' While 2027 Seen as Pivotal Year
The race to define the future of money is speeding up—and according to industry leaders, stablecoins are right at the center. 'It's clear that the most important item on our roadmap is understanding how quickly we can move, and it's obvious that the next three years are the fastest we will ever see in the development of digital assets,' said Sergio Mello, head of stablecoins at Anchorage Digital during Paxos' Global Dollar Network event in New York City. '2025 will have clarity here, 2026 will have clarity elsewhere, and 2027 is when it's all going to happen.' Mello wasn't speaking in hypotheticals. From his vantage point inside one of the first federally chartered crypto banks in the U.S., he sees stablecoins not as niche financial instruments but as a foundational upgrade to the global monetary system. 'Stablecoins are a better representation of fiat, a better way to transfer fiat, but it's really just money that you're moving,' he said. 'We're merging the transport layer and the value layer into the same instrument.' This evolution of money is far from theoretical. According to Mello, industry players across payment networks, custodians, and financial service providers are laying the groundwork for what he called a 'critical mass' of institutional adoption — something he predicted will hit within the next 12 to 24 months, especially in payments. 'That's where the money is going,' he said. Stablecoins were once seen as tools for crypto speculators or offshore arbitrageurs. However, according to Raj Dhamodharan, EVP at Mastercard, that perception is shifting fast. Stablecoins now function as the 'money movement layer' across increasingly mainstream use cases, he said, adding that cross-border remittances, B2B payments, and even retail spending are already seeing traction. For example, Mastercard is enabling cards where users can choose which currency — fiat or stablecoin — they want to spend, while merchants can choose what they want to receive. 'We've started doing that with cards. We've started doing that with remittances,' Dhamodharan said. Ahmed Zifzaf of Worldpay echoed this, describing how their customers use stablecoins for real-time treasury management. 'You can start to see how you accelerate all of these payment and financial flows,' he said, noting that Worldpay is focused on working with 'battle-tested' blockchains like Solana to scale those efforts. Still, not every financial institution is rushing in. 'What constraints do you have because you are a bank?' asked Luca Cosentino of Cross River. The barriers are real, he said — legacy tech stacks, compliance risk, and cultural resistance all slow the pace of innovation. But the split in strategy is becoming clear. 'Certain banks are not going to touch crypto [...] some others will focus on custody [...] some others are going to be focused on money movements,' he said. 'But I have very little doubt that a huge portion of the banks [...] is going to go into crypto one way or another.' Sunil Sachdev from Fiserv noted the same divide. 'We had about 12 banks ready to go,' he said, describing how new rules under SAB 121 effectively froze many of those plans. 'Then everything, in just one day, kind of closed shop.' But the interest hasn't gone away, particularly among smaller banks. 'The bigger guys seem to be cautious,' he said. 'The smaller banks are much more aggressive because they're looking to use this as an opportunity to bring in low-cost deposits. They're looking at this as an opportunity to differentiate themselves.' He painted a vivid picture of how a small-town bank might evolve: three branches, deep community ties, and now a road map to become a 'trusted node' in a global blockchain network, offering tokenized financial products not available elsewhere. While many in the industry assume institutions will lead adoption, Kraken's Mark Greenberg isn't so sure. 'Americans might be actually some of the last groups to adopt a global dollar,' he said. But outside the U.S., demand is strong. 'I do believe a global dollar is better than holding fiat, and we're going to see it,' he said, adding that this is more important in countries where inflation erodes value and yield is scarce. And it won't just be used for savings. 'You save your money there; you use a card there. At some point, you transfer to your friends, you pay your bills,' he said. 'And maybe you buy a meme coin or a stock.' Mike Dudas of 6th Man Ventures suggested the app layer will drive consumer behavior. Stablecoins 'is the fundamental thing that people need to be able to store value in,' he said. 'And now, because of Visa, Mastercard, and off-ramp providers, I can actually spend those dollars I get.' Sheraz Shere of the Solana Foundation added that the infrastructure now exists to support those ambitions. 'There's this assumption that TradFi infrastructure is good,' Greenberg said. 'There are outages there [TradFi institutions] too.' Instead of talking up performance, he said the best strategy is to let results speak for themselves. 'The less we talk about it, the better it is.' While stablecoins are often discussed through the lens of innovation and financial inclusion, policymakers may be thinking about something more immediate: demand for U.S. debt, according to former CFTC chair Chris Giancarlo. '95% of the driving force behind stablecoin legislation is to create more demand for U.S. Treasuries,' he said. 'The remaining 5% is simply working out which regulator gets oversight.' It's not a crypto-driven narrative, Giancarlo argued. Stablecoins are now being viewed as a way to bolster the U.S. dollar's global role by digitizing and distributing it at scale. 'Stablecoins have demonstrated that the global demand for dollars far outstrips the supply in an analog world, and the beauty of stablecoins is meeting that demand,' he said. Jonathan Levin, CEO of Chainalysis, said banks are entering the space cautiously, with more focus on asset stability and market contagion than most crypto-native firms. 'When it comes to banks, they look at it and they're saying: I need to not just understand the stability of my asset, I need to understand the stability of everyone else's assets.' According to Levin, data will be key. Issuers need to track performance across thousands of currency pairs and venues, while also managing risks without compromising decentralization. 'That's a data challenge that is going to be vital,' he said. As legislative efforts advance in Washington, many panelists agreed that durable rules—on reserves, on-ramps, disclosures — are overdue. But the opportunity ahead is bigger than compliance. 'The bottom line is, even if the politicians are focused on demand for treasuries, it's in the American interest to have the dollar continue to serve as the world's reserve currency,' Giancarlo said. By the end of the day, one theme cut across all four panels: stablecoins are no longer an experiment. Whether small banks are searching for relevance, corporations are chasing faster settlements, or regulators are responding to Treasury market pressure, the stablecoin ecosystem is moving fast—and the road to 2027 could decide how global finance is wired for the next generation.
