More than a dozen of the world's largest banks are preparing to issue their own stablecoin on public blockchains, even as international financial regulators question whether stablecoins can ever function as real money. The push reflects a fundamental tension in global finance: central banks and regulators prefer a different approach, but traditional lenders fear being left behind if they don't act now.

What Does the BIS Think Stablecoins Should Be?

At the Jackson Hole Economic Symposium on August 28, Pablo Hernández de Cos, general manager of the Bank for International Settlements (BIS), laid out a stark critique of stablecoins. The BIS is an international organization that coordinates policy among the world's central banks. De Cos argued that stablecoins fail to meet three essential properties that money must have: singleness, interoperability, and financial integrity.

The "singleness" problem is straightforward. If you hold Tether's USDT and want to send money to someone who only accepts Circle's USDC, you must first sell your USDT and buy USDC. Because both tokens trade on open markets, their prices can fluctuate, meaning the recipient might not receive exactly one dollar's worth of value. Traditional money doesn't have this problem.

Interoperability creates another headache. Most stablecoins operate on fragmented public blockchains and scaling layers. Moving the same stablecoin from one blockchain to another requires complicated, sometimes expensive procedures. By contrast, tokenized deposits, which are digital versions of ordinary bank deposits on a programmable ledger, would use central bank accounts to maintain par redemption and finality.

Financial integrity is the third concern. De Cos noted that most stablecoins are held in self-custodied wallets, meaning users control their own private keys without a bank or platform in the middle. Many transfers happen directly between wallets on blockchains without know-your-customer (KYC) checks, which verify the identity of users. This contrasts sharply with traditional banking, where deposits are the least anonymous form of money.

Why Are Banks Ignoring These Warnings?

Despite the BIS's reservations, banks are moving forward aggressively. According to reporting from August 28, a consortium of more than 12 global banks, including Bank of America, Wells Fargo, Santander, Citi, Goldman Sachs, and UBS, is preparing to issue its own stablecoin on public blockchains. The strategic motivation is clear: banks fear that stablecoins could pull deposits away from traditional banking institutions.

Bank of America CEO Brian Moynihan has been explicit about this concern. He warned that as much as $6 trillion in deposits could leave banks if stablecoin issuers were allowed to offer yield, or interest payments, to token holders. "If they make that legal, we'll go into that business," Moynihan stated, signaling that banks want to compete in the stablecoin space rather than cede it entirely to crypto-native companies like Tether and Circle.

The regulatory environment has also shifted in banks' favor. The GENIUS Act, implemented on July 18, 2025, allowed banks to obtain federal-level access to stablecoin issuance through subsidiaries approved by the Office of the Comptroller of the Currency (OCC), though it prohibited issuers from paying interest to token holders.

How Are Smaller Banks Getting Involved?

The stablecoin push isn't limited to megabanks. Smaller lenders are organizing too. Thirty-nine state bankers' associations formed the BankChain Alliance, targeting a 2027 launch. This initiative is designed to give community banks a shared route into tokenized deposits and stablecoins without depending on crypto-native platforms.

The major bank group is considering a dollar-pegged token initially, with potential expansion to currencies from the Group of Seven (G7) nations, according to reporting from the Seoul Economic Daily.

Understanding the Key Differences: Stablecoins vs. Tokenized Deposits

To understand why the BIS prefers tokenized deposits, it helps to see how they differ from traditional stablecoins:

• Issuer: Stablecoins are typically issued by private companies, while tokenized deposits are issued by commercial banks themselves.
• Holder's Claim: With stablecoins, you have a claim on the stablecoin issuer's reserve structure; with tokenized deposits, you have a direct claim on the issuing bank, similar to a traditional bank deposit.
• Redeemability: Stablecoins are designed to redeem at $1, but secondary-market prices can deviate from par value; tokenized deposits are redeemable at par as a bank deposit, guaranteed by the bank.
• Settlement: Stablecoins settle through transfers between token holders on blockchain networks; tokenized deposits settle through interbank transfers using central bank money.
• Blockchain Type: Stablecoins often use public, permissionless blockchains; tokenized deposits typically use permissioned or controlled banking platforms.
• AML/KYC Compliance: Stablecoins can involve pseudonymous wallets and self-custody; tokenized deposits operate within supervised banking infrastructure with full account-based compliance.

What Do the Numbers Say About Stablecoin Usage?

Despite the BIS's concerns, stablecoins have become a major force in global finance. According to a white paper published in January 2026 by the Boston Consulting Group (BCG) and blockchain data company Allium, public blockchains processed over $62 trillion in stablecoin transactions over the course of one year. However, only about $4.2 trillion of this, roughly 7 percent of the total, represented payments made in the real economy for goods and services.

BCG estimated that observable bilateral payments for goods and services in 2025 ranged from $350 billion to $550 billion, which they referred to as the minimum. The market capitalization of stablecoins reached $307 billion in December 2025.

These figures reveal a gap between the volume of stablecoin transactions and their actual use in everyday commerce. Most stablecoin activity appears to be trading, arbitrage, or transfers between wallets rather than purchases of real goods and services.

What Happens Next?

The tension between bank-led stablecoins and the BIS's preferred tokenized deposit model will likely shape the future of blockchain-based payments. Banks are betting that moving onto public blockchains now will allow them to maintain control over the payments infrastructure and prevent deposits from flowing to crypto-native competitors. The BIS, meanwhile, is advocating for a system where central banks and traditional banking infrastructure remain at the center of digital payments.

The outcome will depend on regulatory decisions in major markets and whether banks can successfully launch their stablecoins before regulators impose restrictions. For now, the race is on.