Key Takeaways:

• Global regulators warn that stablecoins could create financial risks if countries don’t follow similar rules.
• Despite a $320-billion market, most stablecoin activity happens in crypto trading, not everyday payments.
• Key risks include sudden mass withdrawals, illegal use, and weakening of national currencies in some countries.

The head of the world’s most powerful central banking body has warned that the fast-growing stablecoin market risks destabilizing global finance if countries fail to align their rules.

Pablo Hernández de Cos, general manager of the Bank for International Settlements (BIS) — the institution that coordinates central bank policy across the globe — delivered the warning in a speech at a Bank of Japan seminar in Tokyo on 20 April 2026.

A $320-billion market that barely functions like money

The global stablecoin market stood at around $320 billion at the time of writing. Tether’s USDt (USDT) and USDC (USDC) account for nearly 85% of the total supply, with roughly 98% of all stablecoins denominated in US dollars.

Despite that scale, de Cos argued the largest stablecoins function more like exchange-traded funds (ETFs) than actual money. Both USDT and USDC have limits on withdrawals, meaning users cannot always instantly convert their holdings at face value, causing prices to frequently deviate from their $1 peg.

And while stablecoin transactions reached around $35 trillion in 2025, only about $390 billion of that came from real-world payments like goods and services. This suggests most activity remains within crypto trading rather than everyday economic use.

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Runs, illicit flows, and threats to monetary control

De Cos flagged three interconnected risks.

First is the possibility of a “run,” where many users try to cash out their stablecoins into US dollars simultaneously. In such cases, issuers may need to quickly sell reserve assets like US Treasury bills or bank deposits, which could amplify stress in broader financial markets.

Second, stablecoins operating on public blockchains — open networks where users can transact without always verifying their identity — raise concerns around illicit activity. Data cited in the BIS speech from blockchain analytics firm Chainalysis shows stablecoins now account for a large share of illegal transactions within the crypto ecosystem.

Third, dollar-backed stablecoins are being increasingly used as savings vehicles in some emerging economies. This trend, known as “dollarization,” occurs when people rely on a foreign currency instead of their local one, potentially weakening a country’s control over its own monetary policy (how a country controls money and interest rates).

Related: South Korea Plans to Apply Existing Finance Laws to Stablecoins and Asset Tokens

Fragmented rules, fragmented markets

Without coordinated global standards, de Cos warned, companies will move to countries with weaker rules to avoid strict regulation, a practice known as regulatory arbitrage.

Bank of England Governor Andrew Bailey, who chairs the Financial Stability Board (the international body that monitors risks to global financial stability), also noted in mid-April 2026 that progress on shared stablecoin standards had slowed over the past year.

While Abu Dhabi, Singapore, and Japan already have dedicated stablecoin frameworks, the US enacted the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins) in July 2025, establishing the country’s first federal rules for payment stablecoins. Broader digital asset market structure legislation, the Digital Asset Market Clarity Act, passed the House and is currently before the Senate.

Japan updated its Payment Services Act in 2022, yet yen-based stablecoins account for under 0.01% of the market, highlighting the limits of national rules.

To reduce risks, de Cos suggested allowing stablecoin issuers access to central bank support, such as lending facilities or insurance-like protections, alongside strict oversight. He also noted that restricting stablecoins from paying interest could help limit the shift of funds away from traditional bank deposits.