New Report Warns: Cryptoassets and Stablecoins Pose Threat to Financial Stability

A Threat to Financial Stability: Cryptoassets and Stablecoins, According to BIS

A newly released survey and report from the Bank for International Settlements (BIS) warns that widespread use of cryptoassets and stablecoins may pose a threat to financial stability. The report also provides insights into the adoption of central bank digital currencies (CBDCs) and central banks’ views and plans regarding CBDCs.

Main Breakdowns:

Almost 25% of central banks are piloting retail CBDCs.
The BIS will issue guidelines to mitigate the risks associated with the industry.
By the end of 2030, 15 retail CBDCs and nine wholesale CBDCs are expected to be launched.
The rise of stablecoins has accelerated the development of CBDCs.
While 93% of central banks are exploring CBDCs, some are less likely to issue a state-backed digital currency soon.

In its plan for a global “unified ledger,” the BIS backs tokenization and calls it a “major leap” in the financial system. However, it views crypto as a “flawed system” and believes that its successful use relies on the trust provided by central banks.

Hot Take:

The BIS’s survey and report highlight the increasing interest and adoption of CBDCs while cautioning about the risks associated with cryptoassets and stablecoins. It emphasizes the need for regulatory approaches to contain these risks to ensure financial stability. The BIS’s support for tokenization shows its recognition of the potential benefits, but it remains skeptical about decentralized cryptocurrencies. The future of money, according to the BIS, lies in a centralized approach supported by central banks.