Pushing the monetary frontier: stablecoins and tokenised deposits

Speech by Mr Pablo Hernández de Cos, General Manager of the BIS, at the Jackson Hole Economic Symposium, 28 August 2026.

Introduction

It is a privilege to open this panel at the Jackson Hole Economic Symposium.¹ This valley has long been associated with pushing frontiers. Two centuries ago, trappers and native peoples exchanged beaver pelts as commodity money here. Today, Wyoming is again exploring the monetary frontier, with the state government having moved to issue a public stablecoin – the Frontier Stable Token (FRNT). The symbolism is apt: we meet where the past and future meet to discuss how money should evolve without losing what makes it trustworthy.

Let me frame the debate on stablecoins and tokenised deposits with a focus on advanced economies. I will first recall the foundations of money. I will then compare stablecoins and tokenised deposits through that lens, discuss what it would take for stablecoins to perform the role of money, and outline why a system built on tokenised deposits looks more promising – while recognising its challenges. Finally, I will sketch how a monetary system where both instruments coexist could be made safe and efficient. 

Foundations of money

Money is more than a technology; it is an institutional achievement. It coordinates economic activity at scale because it is accepted "with no questions asked" as the final settlement of obligations.²

An effective monetary system rests on two foundational properties. First, a common unit of account that allows prices, contracts and balance sheets to be expressed coherently. Second, the singleness of money, under which all monetary instruments denominated in that unit are redeemable at par into central bank money, with finality.

Elasticity of liquidity at the system level underpins these two properties. It ensures that payment needs are met both in normal times and under stress.

When these properties are firmly in place, powerful network effects arise. Interoperability across instruments and platforms allows these network effects to compound rather than fragment. Financial integrity is equally crucial to ensure that payments can flow at par without undermining the rule of law.

In today's two-tier monetary system, these properties are anchored by central bank money and delivered through supervised private intermediaries. This architecture, in turn, anchors trust. It thereby spares users from having to verify the pedigree of each payment instrument at every transaction.

This two-tier system is generally robust, but it is still burdened by frictions. Interoperability is patchy across intermediaries and platforms, competition is constrained and cross-border payments remain inefficient.

Technological innovations such as distributed ledger technology (DLT) – shared, tamper-evident ledgers that synchronise records across multiple nodes via consensus – and tokenisation – representing assets or claims as programmable digital tokens – offer tools to address these frictions.

This brings us to two paths that now lie ahead of us: stablecoins and tokenised deposits. Let me discuss both. I will then compare them against the desirable properties of money – since any innovation must serve, not erode, the foundations that make money work.

Stablecoins versus tokenised deposits

I will first assess whether stablecoins and tokenised deposits uphold the monetary properties that anchor trust – singleness, interoperability and integrity. I will then explore the macro-financial implications of their broader adoption. 

Monetary properties

Both stablecoins and tokenised deposits use tokenisation to transfer value on programmable rails. But their differences are of first-order importance for the monetary system.

Take singleness first. Assume Ben wants to transfer a dollar's worth of stablecoins to Marie. Ben owns USDT (Tether), but Marie only accepts USDC (Circle). In order to make the transfer, Ben needs to sell USDT in the secondary market and use the proceeds to buy USDC, which he can then send to Marie. Since deviations from par in secondary markets are the norm – and sizeable under stress – this transaction may not go through at par. There is no mechanism that enforces singleness. By contrast, tokenised deposits are account-based bank liabilities recorded on a programmable platform; payments debit the payer's balance and credit the payee's balance, with interbank settlement though central bank accounts in the background. Hence in the tokenised deposit model, settlement in central bank money preserves singleness, under which claims denominated in that unit are redeemable at par with central bank money with finality.

Let us now turn to interoperability. Most fiat-referenced stablecoins circulate as bearer-like instruments on public, permissionless blockchains. Yet these blockchains are fragmented across base networks and scaling layers. Therefore, even the "same" stablecoin on different chains is not interoperable without risky or costly workarounds. Tokenised deposits, by comparison, typically circulate on permissioned platforms. These platforms are also not genuinely interoperable. However, by introducing tokenised central bank reserves as a safe settlement asset, tokenised deposits become more fungible across banks, ensuring greater interoperability.³

Finally, what about financial integrity? The pseudonymity of public blockchains – with significant activity in self-custodied wallets – complicates enforcement of anti-money laundering and combating the financing of terrorism (AML/CFT) rules. Recent evidence suggests that the majority of stablecoin balances are held in self-custodied wallets.⁴ Moreover, a rising share of transfers occurs wallet-to-wallet, outside venues with know-your-customer (KYC) checks. Indeed, industry reports note that stablecoins are increasingly used for illicit transactions, raising significant concerns about financial integrity. This is the opposite of traditional money, where the least anonymous form – bank deposits – dominates. The integrity challenge is manageable in the account-based, supervised environment of tokenised deposits. 

Macro-financial implications 

What could the macro-financial implications be if either stablecoins or tokenised deposits were widely adopted? Let me consider these scenarios in turn.

Assuming stablecoin adoption at scale, an important determinant of the macro-financial effects is the composition of stablecoin issuers' reserve assets. Given the current regulatory developments, three types of reserve assets are in focus: wholesale bank deposits, short-term government bills and central bank reserves. These choices affect bank funding and, through it, credit provision and financial stability.

If stablecoin reserves were predominantly held as wholesale bank deposits, retail funding would give way to concentrated, more rate-sensitive wholesale liabilities. This would raise banks' marginal funding costs and thereby tighten lending conditions.

If reserves were mostly held in short-dated government bills, an additional effect might arise as banks sold bills to stablecoin issuers, reducing their high-quality liquid assets.

If reserves, by comparison, were kept to a large extent at the central bank, the expansion of stablecoins would drain central bank reserves from the banking sector.

In each case, banks' liquidity metrics would be likely to initially weaken. Over time, banks would respond by repricing loans and tilting their balance sheets towards more liquid assets. The impact would probably be uneven. Distributional effects could weigh more on smaller banks, creating headwinds for lending to small businesses.

At a conceptual level, two channels pull in opposite directions – a bank lending headwind and a fiscal space tailwind. The former tightens credit as marginal funding costs rise; the latter reflects additional demand for short-dated bills that lowers short-term yields and expands fiscal space. Model-based scenarios from recent BIS research point to a modest net output effect overall, with outcomes shaped by reserve composition, public debt levels and foreign demand for stablecoins.⁵

The origin of stablecoin demand warrants attention. If stablecoin demand arises domestically, issuers' purchases of short-dated government bills will largely replace domestic investors as holders, so the net effects on short-term yields are likely to be modest. By contrast, if demand comes from abroad, it will add to net demand for short-dated bills, pushing short-term yields lower and expanding fiscal space.

Monetary policy transmission may also shift, as a more wholesale-funded system tends to accelerate the pass-through from policy to lending rates. At the same time, if stablecoins remain unremunerated, coin holders may be less directly affected by policy rate changes than depositors, with transmission working mainly through opportunity costs. At present, yields on stablecoins in decentralised lending pools also remain largely disconnected from policy benchmarks.

The composition of stablecoin issuers' reserve assets also influences channels of risk contagion. Stablecoin issuers invest in a narrow set of high-quality and liquid assets. However, in the absence of backstops that underpin trust in traditional and tokenised deposits, stablecoin issuers remain exposed to run risk. If runs do occur, fire sales of government bills or a sudden withdrawal of the issuers' deposits could quickly impinge on core money markets, spreading risks throughout the system. Stablecoin issuers that hold predominantly central bank reserves, by contrast, could be viewed as a safe haven, attracting sizeable flows from the banking sector during stress. This could put additional pressure on banks.

Unlike stablecoins, tokenised deposits operate within the two-tier system. They preserve the tight link between deposit-taking and credit provision. This ensures that funds remain within the banking system, reducing the risk of disintermediation and supporting resilience.

Still, if tokenised deposits were only adopted at the individual bank level – on siloed networks – competitive imbalances could widen. Larger institutions would benefit from scale, data and network effects. Smaller ones might struggle with high upfront implementation costs. They might then face more rate-sensitive deposits and tougher competition for funding, with knock-on effects for small business and local lending. At the same time, round-the-clock operability could quicken deposit outflows and might require additional backstops to safeguard financial stability. I'll come back to these points.

What would it take for stablecoins to perform the role of money?

These contrasts do not pre-judge outcomes. But they do indicate that, in their current form, stablecoins do not yet uphold the foundational properties of money. Notable gaps would need to be closed to approach the "no-questions-asked" standard of money.

Three sets of questions need to be addressed for stablecoins to credibly function as a means of payment at scale.

• The first set relates to singleness and elasticity. Can redemption at par be enforced in all states of the world? What reserves and backstops would be necessary? Would issuers require access to central bank accounts or liquidity facilities, and under what safeguards, to avoid runs and fire sale externalities?
• The second set is about interoperability and How can par exchange be preserved across multiple blockchains and platforms? Is there a credible way to achieve settlement finality across chains without relying on ad hoc bridges that introduce new risks?
• The third set concerns integrity and accountability. How can AML/CFT controls be applied consistently? Should policy frameworks extend beyond issuers and exchanges to address peer-to-peer transfers? How can they balance privacy, data protection and proportionality?

These are not purely technical issues. They go to the heart of the institutional underpinnings of money. In some dimensions, policy can mitigate risks – for example, with robust reserve, liquidity and governance requirements, clear redemption rights, resolution planning and international consistency to reduce regulatory arbitrage. In other dimensions – notably integrity on public pseudonymous rails, and fragmentation across chains – structural frictions are harder to resolve.

The growing adoption of dollar-pegged stablecoins has also raised concerns in some jurisdictions about monetary sovereignty and the potential for digital dollarisation. This can erode monetary sovereignty, starting as a store of value and, over time, extending to pricing and settlement. It can weaken domestic monetary policy transmission and tie local conditions more closely to external policy stances.

On all these issues, international coordination and cooperation will be needed to promote outcomes that serve our societies and strengthen – rather than challenge – global financial stability.

Why build on tokenised deposits – and what are the challenges?

Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system's foundations. The task now is to tackle the practical challenges of scaling this up.

But even though the potential of tokenised deposits is compelling, it remains ahead of today's market realities. At present, there are no multi-bank or inter-jurisdictional ecosystems issuing tokenised deposits in an interoperable framework. Current examples are typically limited to permissioned platforms or rely on designs better characterised as bank-issued stablecoins. While these tokens may offer greater trust and regulatory alignment, they still share many of the same shortcomings as existing stablecoins.

What are the challenges for tokenised deposits? Let me mention a few:

• Interoperability to avoid "walled gardens" and trapped liquidity – potentially through a system of interoperable ledgers or a unified ledger architecture.
• Clear governance and access rules that preserve a level playing field and safeguard competition and inclusion.
• Legal clarity, especially on settlement finality and smart contract
• High operational resilience and cyber security, with robust arrangements for error handling and
• A careful migration path that coexists with legacy systems and protects

Public-private experimentation is already showing feasibility. In Project Agorá, central banks and private institutions have tested wholesale cross-border payments where tokenised commercial bank money settles atomically across currencies, with domestic control and data safeguards preserved.⁶ Evidently, more work will be needed to eventually turn this vision into reality.

Coexistence and implications for central banks

What could a next-generation monetary system based on tokenisation look like?

In practice, stablecoins and tokenised deposits could coexist, provided their roles are clearly delineated and safeguards are in place.

Tokenised deposits should carry the bulk of day-to-day payments and wholesale settlement, within prudential perimeters and with settlement in central bank money.

Stablecoins may serve specialised roles – for instance, in decentralised lending pools. But they should do so under robust, transparent regimes that enforce par redemption for payment use. Alternatively, they could be treated explicitly as investment products with appropriate conduct and disclosure rules. Legislation and further regulations are taking a stance on this in many major jurisdictions.

As the BIS argued in its Annual Economic Report this year, a pragmatic course for policy should comprise the following:

• Integrating tokenisation into the two-tier architecture, anchored in central bank
• Setting internationally consistent requirements for stablecoin arrangements that address shortcomings while allowing useful, well designed applications to expand.

For central banks, three priorities follow from moving towards a tokenised financial system.

• First, anchor singleness on programmable rails. Central banks can provide or enable access to central bank money on tokenised platforms – whether through links to existing reserve accounts or tokenised reserves – to preserve par settlement and elasticity.
• Second, promote interoperability and integrity. The aim is to support common technical standards, governance frameworks and data rules that let networks interoperate safely, domestically and across borders. Central banks can also strengthen cross-border supervisory cooperation and information-sharing to close gaps around illicit finance. Admittedly, this is generally an area for other authorities, such as financial intelligence units. And we must acknowledge that addressing financial integrity risks in decentralised ecosystems remains challenging. New tools and approaches may be needed to effectively apply AML/CFT objectives to this environment.
• Third, take a holistic, system-wide We must continue to assess how design choices affect credit supply, financial stability and monetary transmission. For advanced economies, widespread stablecoin adoption could raise bank funding costs and shift intermediation towards non-banks, potentially making credit provision more procyclical. These effects appear modest in model-based scenarios, as presented in this year's Annual Economic Report, but they warrant close monitoring, especially under stress. Kristalina will turn to the implications for emerging market and developing economies, where foreign currency stablecoins raise dollarisation risks and can link crypto rails to FX markets. A broader lesson, however, applies to all: sound macroeconomic policies and efficient domestic payment systems are the best bulwark against undue "stablecoinisation".

Closing

Let me conclude. Tokenisation offers real gains: programmability, atomic settlement and around-the-clock operations. But the path to the future monetary system lies in improving the old while enabling the new.

If we get this right, the next frontier of money will be modern finance – faster, more efficient and more inclusive – built on a foundation of trust.

Thank you. 

 

¹ With thanks to Sang Hyuk Lim and Ulf Lewrick for input, and Emma Claggett for editorial review.

² See Bank for International Settlements (BIS), "Anchoring trust in money: innovation beyond stablecoins", Annual Economic Report 2026, Chapter III, June 2026.

³ A Maechler, "What makes money, money? Ensuring trust in the next generation financial ecosystem", remarks at Point Zero Forum, Zurich, 24 June 2026.

⁴ G Gopinath, "Stablecoins and anonymous money", Per Jacobsson Foundation Lecture, Basel, 28 June 2026. The lecture draws on joint work with K Calder, W Du and S Stein.

⁵ B Hofmann, M Kaldorf and M Rottner, "The macroeconomics of stablecoins", BIS Working Papers, no 1363, 2026.

⁶ BIS, Project Agorá: A shared programmable platform for wholesale cross-border payments, May 2026. See also Project Agorá – Real value testing