Backed by the moniker “the central bank of central banks,” the Bank for International Settlements (BIS) recently had its general manager, DeCoss, say something fairly restrained: stablecoins “cannot provide a reliable payment solution,” while tokenized deposits are more suitable. Put bluntly, it means: you’re very good, but you’re not for us.

The central bank system views stablecoins with annoyance—it’s not something that started just today. So this remark in itself isn’t exactly news. What concerns me, though, is that among the three reasons DeCoss cited to support his conclusion, there’s a kind of near-plain fear hidden in them. Follow that fear further, and you can see why a loophole that exists in the five jurisdictions’ regulatory frameworks—something that almost nobody has pointed out—comes into play as an explanation.

Bank bleeding: survival anxiety packaged as “consumer protection”

The first reason DeSay gives is that stablecoins cause “bank bleeding.” Consumers move deposits into stablecoins, leaving banks with less funding, which shrinks their lending capacity, and ultimately pushes up borrowing costs for the real economy. Viewed in isolation, this logic holds up. But if you place it next to the conclusion “stablecoins can’t be relied on,” it feels like there’s a layer of window dressing in between: if something is truly unreliable, why would consumers rush to move their money into it?

In plain terms, he’s not afraid of a stablecoin collapse; he’s afraid that stablecoins will be so good that people actually want to move their deposits away. Something truly unacceptable doesn’t need a central bank to come out and explicitly deny it. What needs denial is often what is getting better—forming alternative momentum. So what’s really awkward about this news is that: the BIS says “stablecoins aren’t okay,” but what it describes is a situation where “stablecoins are too good, so they need to be held down.” Under a veneer of technical denial lies structural fear—if stablecoins keep expanding to a scale of $3.7 trillion, that low-interest deposit pool in the banking system will eventually split open a gap that can’t be patched.

Why now: an easily overlooked window of time

Come to think of it, DeSay’s choice of timing this time is remarkably well-calibrated—right after the FSI regulatory report comes out. The report compares the stablecoin regulatory frameworks in the United States, the European Union, the UK, Hong Kong, and Singapore, and the conclusion isn’t complicated: the U.S. is stricter, while Hong Kong, the UK, and the EU are relatively looser.

If you stack these two things together, the BIS’s calculations become clear. The signal truly revealed by the comparison across the five jurisdictions is that global regulation is diverging. The U.S. clamps stablecoin issuers into a “pure settlement machine” role—no lending, no staking, and no permission to trade with their own funds. But Hong Kong, the UK, and the EU leave a loophole, where related companies can do other things.

When the BIS addressed this crack as it had just become visible, it was clearly not making an academic statement. It’s more like a ruler handed to regulators who are still watching, aiming to redraw who is the rightful on-chain payment authority by using “tokenized deposits.” Stablecoins are the illegitimate child; tokenized deposits are the legitimate one. Before the split widens, the BIS needs to hold the definition of “safety” in its own hands.

That “loophole that only regulates the issuing entity, not the group”

In the FSI report, there’s actually a line that’s easy to gloss over: restrictions usually only cover the entity that issues stablecoins and do not extend to the entire corporate group.

The impact of this sentence is not small. In the U.S. (the GENIUS Act), a large portion of the effort is spent enclosing stablecoin issuers as “pure redemption machines,” yet it can’t control the lending subsidiaries under the same roof. The issuance layer is indeed separated, but at the group level they can still take the accumulated funds and stake, lend, and do proprietary trading.

The existence of this gap puts some discount on the slogan “strict regulation.” But it also incidentally exposes something else: regulators may not fully understand what they are regulating. They treat stablecoins as an independent species, but the truly tricky part of stablecoins has never been the token itself; it’s the pool of funds behind the token and the pathways by which these funds quickly flow to other subsidiaries.

The BIS saw through this, so instead of saying “tighten stablecoin regulation,” it simply said, “change the thing”—tokenized deposits. The reason is straightforward: from birth, tokenized deposits carry the genes of a bank account, and every transaction lands in the line of sight of the existing banking system. What the BIS truly wants isn’t to regulate stablecoins; it’s to ensure that “on-chain money” never gets the chance to live independently from the start.

Anti-consensus: the BIS’s “denial” instead confirms stablecoins are irreversible

In a conventional write-up, you might end up with a conclusion like this: the BIS’s doubts pour cold water on stablecoin’s “money dream,” and the future belongs to tokenized deposits.

But I want to make the next judgment, one that runs counter to consensus. Unless global central banks can really come up with a tokenized-deposit solution that is cheaper than stablecoins, more open, and closer to a peer-to-peer experience—at least for now, that’s still far off—then this BIS statement won’t weaken stablecoins. It may instead accelerate their shift from a “vague monetary experiment” into a parallel system that official authorities are forced to take seriously. If something is important enough for a central bank to come out and deny it, it usually means it has already grown too big to ignore.

Tokenized deposits have an inherent drawback: they’re still a bank liability. The bank’s cost structure, the KYC/AML burden, the settlement boundaries—everything gets inherited. Stablecoins can expand to a projected size of $3.7 trillion precisely because they bypass these. If stablecoin users “roll back” into tokenized deposits, then in plain terms you’re putting them back into the banking system and making them pay again for those costs they originally tried to escape. I don’t think that will happen.

A question that keeps people up at night

What the BIS truly exposed this time isn’t the risk of stablecoins themselves, but the deep fear within the central-banking system of the picture where deposits leave banks. This fear won’t automatically dissipate just because of a report or a statement—it’s more likely to return with a different regulatory label at every turning point of stablecoin expansion.

So the last image I can think of is this: a blockchain startup is about to move corporate deposits into a tokenized money-market fund with higher yield and faster settlement, and the entire process doesn’t need to go through banks. When the bank’s board sees this proposal, someone might recall DeSay’s line, “Stablecoins can’t be relied on.” But what’s probably keeping them awake is the numbers in the left-hand column of tomorrow’s balance sheet.

The money that disappears from deposit accounts doesn’t evaporate. It just changes the name from “deposits” to something else, flowing into places that don’t need banks. How long can the banking system keep using the words “can’t be relied on” to block it?