bank for international settlements: stablecoins are difficult to become real money, failing key tests

The bank for international settlements recently released a report stating that stablecoins do not meet the key criteria for becoming a pillar of the monetary system. This institution, known as the "central bank of central banks," believes that digital assets pegged to fiat currencies perform poorly in terms of uniqueness, resilience, and integrity, and therefore cannot be regarded as true currency.

The report acknowledges that stablecoins have certain advantages, such as programmability, anonymity, and ease of use. In the field of cross-border payments, the technological characteristics of stablecoins may lead to lower costs and faster speeds. However, compared to government-issued currencies, stablecoins may undermine government monetary sovereignty and even foster illegal activities, posing potential risks to the global financial system.

Specifically, stablecoins perform poorly in elasticity tests. Taking USDT as an example, its issuance requires full upfront payment, which imposes a prepayment constraint. In terms of singularity, stablecoins are usually issued by centralized entities, and different issuers may set different standards, making them difficult to be universally accepted. Furthermore, stablecoins also have significant flaws in promoting the integrity of the monetary system, as not all issuers follow unified KYC and AML guidelines.

Despite a cautious attitude towards stablecoins, the bank for international settlements remains optimistic about the potential of tokenization technology. The report suggests that a tokenization platform centered around central bank reserves, commercial bank currencies, and government bonds could lay the groundwork for the next generation of currencies and financial systems, bringing revolutionary innovations in areas such as cross-border payments and securities markets.

It is worth noting that after the release of the report, the stock price of a well-known stablecoin issuer experienced a significant drop. This reflects the market's concerns about the future development prospects of stablecoins.

Overall, the report from the bank for international settlements questions the monetary attributes of stablecoins, while also affirming the potential of blockchain technology in financial innovation. This perspective could have profound implications for future regulatory policies and market development of digital currencies.