Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
BIS Stablecoin Warning Meets US Policy Momentum
Stablecoins | June 27, 2025
BIS Says Stablecoins Fail Key Money Tests as US law Progresses
On June 24 2025, in chapter 3 of its Annual Economic Report, "The next generation monetary and financial system" (38 page PDF), the Bank for International Settlements (BIS) warns that stablecoins fail to function as real money. The report arrives just as the United States moves closer to signing the GENIUS Act into law, a federal bill that would bring stablecoin issuers under formal supervision.
The report outlines how stablecoins fail to meet the key tests of singleness, elasticity, and integrity, which defines whether a payment instrument can be accepted at face value, scale with economic needs, and operate safely in the broader financial system.
BIS Report states
“Stablecoins perform poorly when assessed against the three tests for serving as the mainstay of the monetary system,”
BIS Says Stablecoins Fail Three Tests
The BIS applies three core tests to any money-like instrument, and casts serious doubt whether private stablecoins can ever serve as a true foundation for payments or monetary exchange, even if regulated.
See: Stablecoins Are Growing Faster Than You Think
- Singleness - uniform acceptance at face value. Stablecoins often trade at small discounts or premiums and are tagged by issuer, pg85 "much like 19th century private banknotes"
- Elasticity - ability to respond to liquidity demands. Stablecoins must be pre-funded and cannot expand supply dynamically, unlike bank credit backed by central bank reserves. pg75, "Modern real-time gross settlement (RTGS) systems are the canonical example of the need for elasticity. In a two-tier banking system, the central bank is ready to provide reserves to financial institutions elastically at the policy rate against high-quality collateral."
- Integrity - strong safeguards against money laundering and illicit finance. The BIS highlights how unhosted wallets and fake addresses reduce oversight and allow stablecoins to bypass basic controls.
The BIS also says broader risks to financial stability, including potential fire sales of safe assets held in reserve and cross-border flows that could undermine monetary sovereignty in emerging markets.
Genius Act Regulates Stablecoins But Doesn't Call Them Money
The GENIUS Act has now passed the Senate with strong bipartisan support and is moving to the House for consideration but does not treat stablecoins as public money. It takes a supervisory approach while explicitly banning certain features, key provisions include:
See: Amazon and Walmart Exploring Merchant-Led Stablecoins
- Requiring issuers to hold reserves in high quality liquid assets
- Limiting stablecoin issuance to licensed entities
- Prohibiting interest on balances to prevent shadow banking
- Mandating public audits and strict redemption rights
- Allowing federal regulators to shut down noncompliant operations
The bill has advanced in both the House Financial Services and Senate Banking committees and has bipartisan backing. Supporters argue that clear rules are needed to protect consumers and prevent runs on poorly backed coins. But the BIS report raises a bigger question. Even if stablecoins are regulated, should they be foundational to the payment system at all?
Canada Will Need to Decide
While Canada has not yet introduced comparable legislation as the GENIUS Act in the U.S., the BIS developments will influence local debates. Stablecoins are already used by some Canadians for crypto trading, remittances, and access to foreign currency.
The Bank of Canada has shelved retail CBDC development while continuing digital currency research and scenario planning, and OSFI is developing crypto exposure guidance for regulated financial institutions.
See: Quantum Safe Stablecoins Meet Real Time Finance Needs
If the US establishes a regulated market while the BIS encourages a public infrastructure model, Canadian policymakers and fintechs may need to navigate both. That includes deciding whether to integrate regulated stablecoins, develop domestic alternatives, or back a central bank issued platform.
Conclusion
Both public institutions and private developers are building in parallel but the debate is no longer theoretical, and Canada's choices made now will impact financial systems as they grow and evolve.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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