BIS warns of stablecoin ETF risks: redemption runs could trigger a chain reaction in the financial system

The Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos, at a seminar in Tokyo on April 20, 2026, made a far-reaching qualitative judgment: the current world’s largest dollar stablecoins, USDT and USDC, operate more like exchange-traded funds (ETFs) rather than true currencies. This judgment is not a rhetorical metaphor; it is based on three core structural features.

First, stablecoin issuers set redemption fees or impose conditional restrictions in the primary market, preventing holders from exchanging back for dollars at face value at any time, as they would withdraw from a bank account. Second, in the secondary market (exchanges), prices frequently deviate from the $1 peg, and this decoupling phenomenon is especially pronounced during periods of stress. Third, the issuer’s reserve assets are mainly short-term government bonds and bank deposits; this asset allocation structure is highly similar to money market funds. BIS notes that these features collectively constitute “redemption friction”—a structural defect that makes stablecoins, in regulatory classification, more akin to securities than to currencies.

How the structural flaws in the redemption mechanism can become the trigger for systemic risk

BIS’s core concern about stablecoins centers on a clear transmission path: large-scale redemption pressure triggers the sale of reserve assets, which then spreads funding stress to the banking system. This mechanism is not fundamentally different from the logic behind the 2023 Silicon Valley Bank (SVB) run—only the trigger point has shifted from traditional bank deposits to on-chain stablecoins.

When panic emerges in the market, large numbers of holders redeem stablecoins at the same time, forcing issuers to sell their holdings of short-term government bonds and bank deposits in already pressured markets. This selling not only drives down the prices of related assets, but can also generate knock-on effects for banks that hold the same assets. Notably, BIS General Manager de Cos also proposed a path to mitigate risk: if stablecoin issuers can connect to arrangements similar to deposit insurance or central bank lending facilities, such risks can be “significantly reduced.”

Why the high concentration in the stablecoin market amplifies systemic importance

As of April 21, 2026, USDT’s market capitalization is approximately $187.26 billion, accounting for 59.81% of the total stablecoin market; USDC’s market capitalization is about $78.2 billion, representing 24.97%. The two issuers combined account for about 85% of global stablecoin circulating supply. This concentration itself constitutes a systemic vulnerability.

BIS believes that when these two issuers control the overwhelming majority of global stablecoin supply, their structural flaws rise from issues of individual products to risk exposures at the system level. Concentration not only means risks are concentrated; it also means that once either issuer faces a redemption crisis, the shock can spread rapidly through the financial system via the commonality of their reserve asset holdings.

What substantive challenges does stablecoin expansion pose to monetary policy transmission

BIS incorporates the impact of stablecoins on monetary policy into its core risk analysis framework. De Cos warns that if dollar-denominated stablecoins continue to grow to a size sufficient to rival traditional currencies, they will have “substantive consequences” for countries’ monetary policy and financial stability.

When users shift traditional bank deposits to holding stablecoins, central banks’ ability to manage liquidity faces a direct challenge. A more far-reaching impact is the “dollarization” risk in emerging economies. IMF officials noted that in some emerging markets, dollar stablecoins have already occupied a “substantial share” of the payment space, posing a threat to local currency sovereignty. Large-scale capital migration from the domestic currency to dollar-pegged stablecoins could weaken central banks’ ability to manage their own economies. Standard Chartered analysts expect the size of dollar stablecoins held by emerging markets could surge from $173 billion at the end of 2025 to $1.22 trillion by 2028.

Why divergences in global stablecoin regulatory frameworks could lead to severe fragmentation in financial markets

In his warning, de Cos explicitly pointed out that if countries regulate stablecoins in different ways—“different jurisdictions’ different regulatory frameworks for stablecoins may lead to serious market fragmentation, or foster harmful regulatory arbitrage.”

The regulatory paths in the three major global economies have already shown clear divergence. The European Union’s Markets in Crypto-Assets Regulation (MiCA) will come into full effect on June 30, 2026. Under it, the right to issue stablecoins is limited to authorized credit institutions or electronic money institutions, along with strict anti-money laundering and reserve audit requirements. In the United States, the GENIUS Act was signed into law in July 2025, establishing a federal licensing framework for payment stablecoins. The U.S. Office of the Comptroller of the Currency (OCC) released an implementation proposal in February 2026, further refining reserve standards, redemption obligations, and capital requirements. Meanwhile, the Vice Governor of the Banque de France has suggested amending MiCA regulations to restrict the use of non-euro stablecoins in everyday payments, while European countries are actively promoting locally issued euro-denominated stablecoins.

These differences are not simply technical disagreements; they reflect a fundamental divergence in how stablecoins are fundamentally defined—whether stablecoins are regulated as payment instruments or managed as financial products. This difference determines that enterprises engaged in stablecoin business globally will face completely different compliance costs and operational constraints.

Why international coordination has stalled, and how regulatory arbitrage space forms

Last week, Andrew Bailey, Chair of the Financial Stability Board (FSB) and Governor of the Bank of England, warned that progress across countries in developing international standards for stablecoins has slowed over the past year. Against the backdrop of global stablecoin supply surpassing $31.5 billion, a regulatory vacuum is expanding.

BIS specifically noted that large-scale stablecoin activity on public, permissionless blockchains and in non-custodial wallets operates outside traditional anti-money laundering (AML) and counter-terrorist financing (CTF) control frameworks. Unless dedicated safeguards are set up in fiat on- and off-ramp channels, these tools will continue to be easy to use illegally. The existence of this blind spot—combined with differences in regulatory standards across countries—creates structural space for regulatory arbitrage: firms can choose jurisdictions with the most lenient rules to conduct business, shifting high-risk activities into regulatory lowlands.

What potential solutions central banks and policymakers are considering

To address the risks above, BIS and policymakers in various countries have proposed a multi-layered approach. At the micro level, restricting stablecoin payment interest is one option under discussion. De Cos pointed out that if holding stablecoins yields no return and carries higher opportunity costs (for example, during periods of high interest rates), then the trend of funds shifting from bank deposits to stablecoins may be less pronounced.

At the institutional level, allowing compliant stablecoin issuers to connect to central bank lending facilities or deposit insurance mechanisms is seen as an effective path to reduce redemption run risks. At the macro level, the international community urgently needs to establish unified stablecoin regulatory standards to eliminate the space for regulatory arbitrage. While achieving this goal is extremely difficult in the current geopolitical environment, BIS’s continued pressure is pushing “global regulatory coordination” to the forefront of the international financial policy agenda.

Summary

BIS’s qualitative assessment of stablecoins as “ETF-like” is not an academic discussion; it is a systematic disclosure of potential systemic risks within the $31.5 billion market. From the structural flaws in redemption mechanisms, to the contagion effects amplified by high market concentration, and to the financial fragmentation that could result from divergences in regulatory paths across countries, BIS’s warning chain is clear and logically inevitable. For market participants, understanding how this regulatory logic is evolving may have more long-term value than focusing on short-term price fluctuations.

Frequently Asked Questions (FAQ)

Q1: Why does BIS characterize stablecoins as “more like ETFs” rather than currencies?

BIS points out that stablecoin issuers set redemption fees and impose restrictions in the primary market, and secondary market prices also frequently deviate from the $1 peg. These features align more with the behavior pattern of ETFs or investment products rather than the unconditional convertibility that true currencies should have. Therefore, BIS considers them to be closer to securities in regulatory classification.

Q2: Why can stablecoin redemption mechanisms trigger system-wide risks similar to bank runs?

Stablecoin issuers typically hold short-term government bonds and bank deposits as reserves. Once large-scale redemption demand arises, issuers are forced to sell their reserve assets in already pressured markets. This not only depresses the prices of related assets, but may also cause knock-on effects for banks holding similar assets—similar to the bank run triggered in 2023 when Silicon Valley Bank was forced to sell after its bond assets lost value.

Q3: How large is the current global stablecoin market? What are the shares of USDT and USDC?

As of April 21, 2026, USDT’s market capitalization is approximately $187.26 billion, accounting for 59.81% of the total stablecoin market; USDC’s market capitalization is about $78.2 billion, representing 24.97%. The two together account for about 85% of global stablecoin circulating supply.

Q4: What are the main differences in stablecoin regulation across countries?

Under the EU’s MiCA framework, the right to issue stablecoins is limited to authorized credit institutions or electronic money institutions, with strict reserve and audit requirements; the U.S.’s GENIUS Act establishes a federal licensing framework, with the OCC responsible for regulating payment stablecoin issuers. The two frameworks differ significantly in areas such as reserve standards, interest prohibitions, and anti-money laundering requirements.

Q5: What risk mitigation solutions has BIS proposed?

BIS General Manager de Cos proposed that if stablecoin issuers can connect to arrangements similar to deposit insurance or central bank lending facilities, the redemption run risks arising from market pressure can be “greatly reduced.” In addition, restricting stablecoin payment interest is also discussed as a policy option to reduce the incentive for bank deposits to migrate into stablecoins.