BIS Criticizes Trump's Stablecoin Promotion: "Concerns Over Undermining Monetary Order"

Violation of the Principle of Monetary Singleness
Concerns Over Criminal Abuse and Financial Market Shocks
Proposing the 'Agora Project' as an Alternative

The Bank for International Settlements (BIS) has expressed strong concerns regarding President Donald Trump's policy initiative to promote private stablecoins in the United States. The BIS warned that stablecoins could threaten the central bank-based monetary order and pose serious risks to financial stability.

According to the Financial Times (FT) on June 24 (local time), the BIS stated in a special chapter of its annual report released that day, "Stablecoins are structurally bound to undermine the 'singleness of money' principle," and pointed out that "they could create cracks in the monetary order guaranteed by central banks and impose real costs on society as a whole."

This refers to the idea that one dollar should always be accepted as one dollar everywhere. However, the BIS emphasized that stablecoins are merely digital assets issued by private entities backed by dollar assets, and are fundamentally different from legal tender issued by central banks.

This warning comes as President Trump earlier this year announced his intention to foster stablecoins through an executive order, and as the 'GENIUS Act' recently passed the U.S. Senate. This act aims to incorporate stablecoins issued by private companies into the institutional system and legalize them under a regulatory and supervisory framework.

The BIS also warned about the potential for stablecoins to be exploited for criminal purposes. The report stated, "Stablecoins, which guarantee anonymity and can bypass Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, are highly likely to be used for illicit financial transactions," adding that "they have become a primary means of digital assets for criminal use."

There were also concerns raised about the potential for shocks to financial markets. The BIS noted, "Stablecoin issuers have emerged this year as the third-largest buyers of U.S. short-term Treasury securities," and warned that if investors were to redeem stablecoins on a large scale, it could cause significant volatility in both the Treasury and foreign exchange markets.

The BIS also stated that the cross-border spread of stablecoins could undermine monetary sovereignty and the policy credibility of central banks in developing countries. The BIS pointed out, "These assets can circumvent foreign exchange controls and undermine the effectiveness of domestic central banks' monetary policy."

As an alternative to stablecoins, the BIS proposed a digital payment system led by central banks. A representative example is the Agora project, which is led by the BIS and involves the central banks of seven countries, including the United States and European nations. This project is a cross-border payment and settlement infrastructure that aims to improve the monetary system using deposit tokens or central bank digital currencies (CBDCs).

The BIS emphasized, "The key is to preserve the singleness of money and financial stability while leveraging the advantages of digital technology," and stressed that a public-based payment system is the path to future payment innovation.