Stablecoins rose rapidly to become a leading market, but that does not necessarily mean their longevity has ceased to be doubted. The Bank for International Settlements recently raised this issue again, with its latest report asserting that stablecoins fail three key criteria any good money should meet: singleness, elasticity, and integrity. But for myself, I can't quite see eye to eye with that opinion.
Summary
BIS criticism vs. reality: The Bank for International Settlements asserts that stablecoins do not succeed at singleness, elasticity, and integrity — but the argument fails to account for how these work in practice.
Singleness isn't absolute: Stablecoins can temporarily deviate like bank deposits in crises (e.g., SVB), but USDC/USDT still redeem 1:1 and work when the banks are closed.
Elasticity is not missing, but different: Banks use settlement lag to generate liquidity, whereas stablecoins settle immediately. Mechanisms such as flash loans demonstrate that elasticity can be programmed.
Integrity works both ways: Banks block less than 1% of criminal flows, whereas blockchain transparency facilitates improved tracing and even recovery of stolen funds.
Work in progress, not failure: Stablecoins don't have to be like banks — they simply have to hold value, move smoothly, and be trusted, and they can do that in ways banks can't.
Stablecoins are far from perfect, to be sure. Even after reaching quite a bit of progress, the market remains modest-sized compared to old-fashioned banking and projections on future development have already been reduced in recent times. JPMorgan, for instance, currently forecasts that the stablecoin market will hit $500 billion by 2028 — cut in half from the trillion-dollar forecasts that some were speculating on just a year ago.
Further, stablecoins have not yet reached mainstream usage outside of crypto-native platforms. That is, they remain far from becoming mainstream financial instruments or competing with banks in size.
But that doesn't imply that they don't pass the three tests BIS employed to exclude them. In fact, I would contend that they may pass them more successfully than banks do. It's a question of how we frame it.
Singleness: A practical perspective
The BIS report contends that stablecoins are short on "singleness" — the principle that each unit of money must be equivalent to any other unit. In theory, this makes sense. In reality, singleness is never absolute. Even bank deposits can depreciate or become illiquid in times of stress.
Consider USDC
and Tether
, the largest and most popular stablecoins. They're not any less "single" than old-fashioned bank deposits. Holders may exchange them for U.S. dollars at face value. Sometimes the market price is a bit off, but the same is true of bank deposits. Just consider the collapse of Silicon Valley Bank — some depositors sold their claims at discount in order to exit more quickly. That's not so far from USDC temporarily trading below its peg during the same crisis due to hesitation of where reserves were held.
Stablecoins, though, provide something that banks do not: the capacity to soak up instant demand. During weekends or holidays when banks are shut, you can still exchange USDT or USDC. Tokenized bank deposits — if they catch on at all — would likely act similarly. So if we're being just, stablecoins aren't failing singleness; they're simply demonstrating how the very idea is struggling in actual circumstances.
Elasticity: Faster doesn't mean weaker
Coming next: elasticity — the premise that a money system needs to expand or shrink to accommodate real economy needs. Stablecoins, the BIS argues, are elastic because they need to be prepaid with cash. You can't spend what is not yet minted, and further issuance necessitates the prepayment by holders.
And here's the twist: stablecoin settlements work very differently from banking as usual. With banks, if you make a funds transfer, it can take at least one business day for the funds to clear. In that time, banks can essentially "print" temporary money since the same funds may be in two places simultaneously: the sender's account still indicates the balance while the recipient bank executes the incoming payment. This gap is one of the mechanisms by which banks sustain liquidity and ensure payments continue to flow, even though the actual cash hasn't transferred yet.
Stablecoin transactions function otherwise because settlement is immediate on the blockchain. As soon as a transaction is finalized, the funds are sent — there's no "money in transit" as there is with banks. That being said, it is feasible to construct crypto mechanisms that approximate bank-like liquidity.
One of the ways to do that is via flash loans, where essentially "unbacked" stablecoins are taken as a loan and paid back in cryptocurrency within the same block transaction. This implies instant liquidity, without the system being left with bad debt.
It's a different model, but it illustrates that stablecoins don't need to emulate banks precisely — they can design elasticity into the code base, settling transactions quickly while still growing when necessary for system functionality.
Integrity: Is the banking system actually safer?
Lastly, the BIS report brings up the question of integrity: how well a money system keeps illicit activity at bay and enforces compliance. Banks have had decades of anti-money laundering controls in place. Crypto, by nature, is more open — and that troubles regulators.
But conventional banking AML is far from unbreakable. UN estimates place as little as 1% of financial crime being actually prevented by systems today. In cryptocurrency, hacks do occur — and they're very frustrating — but the openness of blockchains ensures that stolen funds can be traced in ways that banks simply cannot.
And because of this, a large percentage of crypto stolen funds can ultimately be retrieved. Perhaps not all, but it's still much better than the miniscule percentage of criminal funds caught in the legacy banking system.
Stablecoins are still a work in progress — but that doesn't necessarily mean that banks come out ahead
In short, dismissing stablecoins because they are different from banking entirely misses the argument. Stablecoins don't have to be banks to work — they simply have to do what money is meant to do: retain its value, go when it's necessary to go, and enjoy trust.
On all fronts — singleness, flexibility, and honesty — the comparison is more subtle than the BIS report implies. If anything, the test should challenge banks to innovate too. The future of money isn't about protecting old models; it's about creating systems that work for the people whose money they are.
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