told<\/a> a Bank of Japan seminar in Tokyo on Monday that U.S. dollar-denominated tokens could have \u201cmaterial consequences\u201d for global economic policy.\u00a0<\/p>\nHe argued that the current infrastructure supporting these coins is insufficient for them to function as a reliable means of payment.\u00a0<\/p>\n
While digital tokens offer faster cross-border transfers and smart contract capabilities, de Cos suggested that the largest players, specifically USDt and USDC, behave more like investment products than liquid cash.<\/p>\n
Regulatory pressure builds across Europe<\/h2>\n
The BIS chief pointed to the fees and specific conditions required for primary market redemptions as evidence that stablecoins currently function like exchange-traded funds, which creates a specific risk of contagion because issuers back their tokens with short-term government debt and bank deposits.\u00a0<\/p>\n
<\/p>\n
During times of market stress, a sudden rush of investors trying to cash out could force issuers to dump these reserve assets, potentially destabilizing the very markets they rely on for liquidity, he warned.<\/p>\n
As stablecoins and tokenized money-like assets grow quickly, policymakers across jurisdictions are stepping up discussions around regulatory frameworks.<\/p>\n
Europe is already moving to address these vulnerabilities by tightening the rules for tokenized money.\u00a0 Denis Beau, First Deputy Governor of the Bank of France, recently urged the European Union to expand the Markets in Crypto Assets (MiCA) regulation to limit the use of non-euro stablecoins in daily payments.\u00a0<\/p>\n
He noted that stricter rules are necessary to prevent regulatory arbitrage, where issuers might try to bypass laws by moving operations between different jurisdictions during a crisis.<\/p>\n
The European Central Bank has similarly highlighted that while both euro stablecoins and money market funds perform \u201cliquidity transformation,\u201d they currently operate under different levels of transparency. This lack of oversight in the crypto sector is compounded by the use of public, permissionless blockchains.\u00a0<\/p>\n
De Cos warned that because many transactions happen in \u201cunhosted\u201d wallets, a significant portion of activity bypasses Anti-Money Laundering and Counter-Terrorism Financing controls.<\/p>\n
To counter these risks, Swiss banks, including UBS, recently launched a pilot for a franc-denominated stablecoin. The project plans to harness blockchain technology while keeping the currency firmly anchored within the regulated financial system.<\/p>\n
<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"
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