Central Banks Declare Stablecoins a Systemic Financial Threat: Who Controls Them and Why It Matters

Central Banks Shift Focus from Risk to Control of Stablecoins

Global central banks have moved beyond debating whether stablecoins pose risks. Their primary concern now is who will regulate and control these digital assets. On April 20, Bank for International Settlements (BIS) General Manager Pablo Hernandez de Cos called for global cooperation on stablecoins, calling it "critically important."

The BIS, often referred to as the central bankers' central bank, has previously raised concerns about stablecoins. However, the language used in recent warnings has grown significantly sharper. De Cos highlighted several systemic risks, including:

• Market runs: Sudden redemptions could trigger liquidity crises and market stress.
• Dollarization acceleration: Dollar-pegged stablecoins may hasten the dollarization of developing economies.
• Regulatory arbitrage: Fragmented regulations could allow private firms to exploit cross-border loopholes.

These warnings reflect a shift from investor-protection concerns to systemic risk assessments.

What Are Stablecoins and Why Are They a Threat?

A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a fiat currency, typically the US dollar. The two largest stablecoins, Tether's USDT and Circle's USDC, together account for roughly 85% of the $315 billion in stablecoins currently in circulation.

Unlike traditional bank deposits or legal tender, stablecoins function as private IOUs worth $1, backed by reserves such as US Treasury bills. They are designed for speed across borders and crypto markets. At their current scale, this convenience has become a major concern for central banks.

How Stablecoins Disrupt Banking and Monetary Policy

Central banks are not just worried about the stability of stablecoin pegs. Their deeper concern lies in how these digital assets interact with and potentially destabilize the traditional banking system.

When individuals hold stablecoins instead of bank deposits, banks lose a critical funding source for loans. Additionally, when payments settle on private token networks rather than traditional banking infrastructure, banks lose:

• Fee income
• Transaction data
• Customer relationships

The European Central Bank (ECB) has been explicit about these risks. In November 2025, the ECB conducted a war-game scenario modeling the impact of $2 trillion in stablecoins on European financial stability. Their conclusion was stark: at that scale, stablecoins could become a direct transmission channel for American financial stress into European banks.

Projected Growth and Its Implications

Research from Citi, published in April 2026, projects stablecoin issuance to reach $1.9 trillion by 2030 in its base case scenario. Under higher-adoption scenarios, this figure could climb to $4 trillion.

These projections are already influencing central banks' planning horizons and policy frameworks. The potential for stablecoins to extract deposits from traditional banking systems has become a pressing issue.

According to the US banking lobby, stablecoins could siphon off roughly $500 billion in deposits by 2028 if they offer competitive yields. This shift would reduce the funding available for banks to issue loans, potentially constraining credit availability in the real economy.

The Federal Reserve’s Warning on Payment Stablecoins

In a March 2026 note on payment stablecoins and cross-border payments, the Federal Reserve added another layer of concern. A large stablecoin sector operating outside the traditional banking system could weaken the transmission of monetary policy to the real economy. Since the Fed’s tools rely on influencing bank behavior, a diminished banking sector could blunt the effectiveness of monetary policy.

Conclusion: A New Era of Financial Regulation

The rise of stablecoins is forcing central banks to rethink their regulatory approaches and monetary policy frameworks. The shift from viewing stablecoins as a niche investment to recognizing them as a systemic threat underscores the need for coordinated global action. As stablecoins continue to grow, their impact on financial stability, banking systems, and monetary policy transmission will remain a critical focus for policymakers worldwide.