Introduction

Stablecoins have evolved from niche technological experiments to instruments of growing relevance in the global financial ecosystem. By 2025, their role as settlement infrastructure, value transfer vehicle, and bridge between traditional and decentralized markets has reached an inflection point. BIS Bulletin No. 108 analyzes this expansion, highlighting associated risks, regulatory responses, and possible pathways for secure integration into institutional environments.

The importance of this bulletin extends beyond its snapshot of the present moment. It sets a framework for debate among regulators, central banks, and institutional participants, defining key parameters for a sector seeking scale and legitimacy without undermining financial stability.

The Rise of Stablecoins

According to BIS estimates, the stablecoin market surpassed USD 170 billion in capitalization in the first half of 2025, representing a substantial share of transaction volume in both DeFi applications and centralized exchanges. Three forces stand out:

  • 24/7 settlement demand: Stablecoins offer round-the-clock, predictable transfer of value across jurisdictions.
  • Integration with tokenized assets: Government securities, money-market funds, and tokenized deposits increasingly use stablecoins as liquid collateral.
  • Regulatory clarity: Recent legislation, such as the GENIUS Act in the United States and MiCA in the European Union, provided a legal foundation that reduces uncertainty for issuers and corporate users.

Yet rapid growth has also surfaced systemic risks: concentration among a few issuers, opacity of reserves, technological vulnerabilities, and the potential for digital bank-run dynamics.

Policy Challenges

The bulletin identifies three main areas of concern.

1. Integrity and Governance of Reserves

The credibility of a stablecoin rests on the quality and transparency of the assets backing its value:

  • Independent, standardized audits are still rare.
  • Reserves often include risk-bearing assets, creating a mismatch between promised stability and actual redemption capacity.
  • Heavy concentration in short-term government securities links stablecoin stability to broader money-market dynamics.

2. Liquidity Risk and Financial Stability

The speed and scale of redemptions represent a new dimension of systemic risk:

  • Loss of confidence could trigger instant digital runs, unlike the slower dynamics of traditional bank runs.
  • Mass redemptions might spill over into sovereign debt markets, affecting short-term funding.
  • Interconnections with investment funds, broker-dealers, and DeFi platforms amplify contagion risks.

3. Regulatory Fragmentation

Global inconsistency complicates oversight:

  • The US and EU are advancing comprehensive frameworks, but many emerging economies remain in exploratory stages.
  • This uneven landscape encourages regulatory arbitrage.
  • AML/CFT standards remain unevenly applied across blockchain-based networks.

Pathways for Institutional Integration

Rather than restricting innovation, the BIS emphasizes the need to shape stablecoin development in line with public policy objectives.

Proportional Supervision

  • Apply minimum requirements for capital, disclosure, and reserve audits.
  • Calibrate oversight based on scale, distinguishing between small fintech issuers and global conglomerates.

Reserve Transparency

  • Standardize reporting on reserve composition, ideally with near real-time updates.
  • Explore tokenization of reserve assets, enabling on-chain verification of collateral.

Interoperability with Traditional Systems

  • Develop automatic conversion mechanisms between bank deposits and regulated stablecoins.
  • Promote connections with RTGS and instant payment infrastructures.

International Coordination

  • Leverage multilateral forums (G20, FSB) to align supervisory requirements.
  • Encourage cross-jurisdictional sandboxes to test interoperability.

Implications for Financial Institutions

For banks, asset managers, and pension funds, the report signals several practical considerations:

  • Treasury management: Regulated stablecoins may serve as efficient settlement tools outside standard operating hours, reducing pre-funding costs across currencies.
  • Tokenized products: Investment funds and securities could adopt stablecoins as default payment rails, enhancing liquidity and operational efficiency.
  • Programmable compliance: Smart contracts enable automated KYC/AML checks, embedding regulatory compliance directly into settlement processes.
  • Reputational risk: Exposure to unregulated stablecoins may attract scrutiny or sanctions, highlighting the need for rigorous due diligence.

Global Landscape

The BIS compares approaches across regions:

  • United States: The GENIUS Act introduces categories of issuers (banks, credit unions, licensed entities) under OCC supervision.
  • European Union: MiCA establishes requirements for “e-money tokens” and “asset-referenced tokens,” with strong focus on safe reserves and transparency.
  • Asia: Singapore and Hong Kong are among the most advanced, enforcing strict reserve rules and independent audits.
  • Emerging Markets: Many jurisdictions are assessing whether stablecoins can enhance financial inclusion and reduce remittance costs.

Conclusion

The growth of stablecoins is not simply a technological development; it marks a structural transformation in how value is transferred and settled globally. As the BIS underscores, the key is not to curtail innovation but to integrate stablecoins into the regulatory perimeter in ways that safeguard stability and foster trust.

For institutions, the bulletin is a call to action: to assess risks, update risk management frameworks, and prepare for a future in which regulated stablecoins may become central to global finance.

Reference:
Bank for International Settlements. (2025). Stablecoin growth: policy challenges and approaches. BIS Bulletin No. 108. Available here

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