Stablecoins are hailed as a stable form of currency due to their full backing by reserves; however, a comprehensive assessment by the Bank for International Settlements (BIS) has once again placed them in the spotlight. As the primary monetary authority for central banks, the BIS investigates systemic vulnerabilities in fintech and global payment systems. Its latest research reveals potential vulnerabilities in stablecoins, suggesting that despite seemingly solid reserve assets, they may still face instability during economic crises.
Can collateral truly ensure stability?
According to the BIS analysis, while stablecoins have reserves, they do not completely shield against the risk of losing their pegged value. In situations of increased market pressure and surging redemption requests, timely access to reserves is crucial; otherwise, even fully-backed stablecoins may face the danger of devaluation.
The report also compares stablecoins to euro deposits, which refer to dollar deposits outside the U.S. regulatory framework. Traditional banks maintain their credibility through settlement with central banks and liquidity support, a privilege that does not extend to stablecoins, which rely entirely on their backing assets.
Cryptocurrency research firm Delphi Digital emphasizes the BIS report's viewpoint, noting that during high-demand redemption events, the limited reserve support does not guarantee stability. The lack of liquidity in fully-backed assets during a crisis poses significant systemic risks, highlighting the fragile trust system within the stablecoin space.
What lessons do history and regulation teach us?
The analysis considers historical lessons, comparing stablecoins to the “wildcat banks” of 19th century America, which tended to collapse during large-scale customer withdrawals due to a lack of regulation.
Delphi Digital demonstrates how the U.S. banking industry evolved from a decentralized and unstable environment to a system dominated by strict regulation and federal control, achieving lasting stability. The BIS believes that today’s stablecoin market shares vulnerabilities similar to its historical predecessors under diverse blockchain and jurisdictional rules, lacking a unified support mechanism.
Globally, governments are drafting legislative plans to address the risks posed by stablecoins. Proposed regulatory measures in the U.S., Europe, and parts of Asia focus on reserve management, licensing, and operational standards for stablecoin providers.
As governance continues to evolve, the interaction between digital assets and traditional finance will also transform. With the consolidation of legislative frameworks, stablecoins will gradually adapt to these emerging standards in major global economic zones.