- The Bank for International Settlements (BIS) said stablecoins function more like exchange-traded funds (ETFs) than actual money.
- It said stablecoins share traits with ETFs because their secondary-market prices can diverge from face value, creating premiums and discounts.
- The BIS report directly challenges the crypto industry’s claim that stablecoins represent the future of blockchain-based payments and money.
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The Bank for International Settlements said stablecoins function more like exchange-traded funds than money, warning of foreign-exchange risk.
CoinDesk reported on June 29 that the BIS, in its latest annual report, said “stablecoins function more like alternative investment vehicles such as ETFs than money.” The BIS based that assessment on the fact that stablecoins can trade away from face value in secondary markets.
In the report, the BIS said a defining feature of true money is that it is accepted as a means of payment without question. Dollar bills and bank deposits circulate at par, while tokens pegged to fiat currencies can at times trade away from face value in secondary markets.
The BIS said that trait makes stablecoins similar to ETFs. Just as ETFs typically trade at a slight premium or discount to net asset value, stablecoins do not always trade at exactly $1.
The crypto industry has promoted stablecoins as the future of blockchain-based payments and money. The BIS report directly challenges that claim.
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